The VIX fell 6.43 percent last week, while the aggregate put-call ratio surged to 1.49 from 1.33 in the last four sessions.
The Nifty closed flat by forming a small Bullish candle on the daily chart and a high-wave long-legged Doji candle on the weekly chart.
It started the week near 10,765 and slipped to 10,550, before recovering to 10,818. It ended at around 10,765.
The price set-up suggests a positive-but-range-bound view, as the decline is being bought into while the follow up is missing at the high points.
Now the index needs to hold above 10,770 to extend its move towards 10,888, and then 10,929. Support is seen at 10,720, followed by 10,660.
The Nifty remained range-bound during the week, while its futures have gone back to a discount of 20 points.
The VIX fell 6.43 percent in the course of the week, while the aggregate put-call ratio surged to 1.49 from 1.33 in the last four sessions.
Lower volatility and a higher put-call ratio suggests that the market has a bullish bias.
On the options front, the maximum put open interest is at the 10,600 strike price, followed by the 10,500 strike price.
The maximum call open interest is at the 11,000 strike price, followed by the 10,800 strike price.
Put writing has been seen the most at the 10,600 and 10,700 strike prices, while call writing has been seen the most at the 11,000 and 10,700 strike prices.
Options data suggests a broader trading range of between 10,650 and 10,850 for next few sessions.
The Nifty traded in a broad range of 10,420-10,929 in the May series, and is likely to remain in that range in the absence of any major triggers.
However, support levels are moving higher, as compared to the May series, even in the face of resilience from heavyweight private bank stocks.
For the index’s momentum to continue, heavyweights like Reliance, TCS, Infosys, Bajaj Finance, and Hindustan Unilever would need push it higher.
The pause in private banks’ momentum is cause for concern, but PSU banks are showing signs of recovery.
The Bank Nifty formed an inside bar on the weekly chart as it traded in a range last week.
The index has been respecting its rising support trend line by connecting recent swing lows of 24,753, 25,662, 25,668 and 26,069.
It now has to continue holding above 26,250 to witness an up move towards 26,750. Immediate support levels are seen at 26,100, followed by 25,950.
In terms of individual stocks, it appears to be a mixed bag. Can Bank, SBI, UBL, MGL, IGL, Lupin, Dr Reddy’s, Bajaj Finance, Infosys, HCL Technologies all have positive cues.
Meanwhile, Ashok Leyland, Axis Bank, ICICI Bank, and Hindalco may witness a pause in momentum.
Disclaimer: The author is Associate Vice President, Analyst-Derivatives at Motilal Oswal Securities. The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
