Nifty bias shifts to 'Buy on Dips', max pain seen at 24,400; shows F&O data

F&O cues for Nov 07: Meanwhile, Bank Nifty PCR dipped to 0.72, reflecting a shift towards a cautious outlook, says Dhupesh Dhameja of SAMCO Securities.

Futures & Options (F&O) Insights for Thursday, November 07: The NSE Nifty 50 index logged back-to-back 1 per cent gains in the last two trading sessions as the index bounced back from oversold levels. The Nifty 50 is now seen quoting around 24,500 levels. 

 

Technically, the Nifty saw follow-up buying after forming a piercing line candle on Tuesday on the daily chart, and it confirmed the pattern by holding above 24,320. As a result, the short-term relief rally could continue to levels between 24,600 and 24,700, says Hrishikesh Yedve, AVP Technical and Derivatives Research at Asit C. Mehta Investment Interrmediates.

 

 

On the downside, the 24,200 will provide solid short-term support for the Nifty, followed by 150-day exponential moving average (DEMA) at 23,990, suggesting a 'buy on dips' approach until this level, the analyst added.

 

Jatin Gedia, Technical Research Analyst at Sharekhan by BNP Paribas explains that Nifty has violated the lower top lower bottom formation on the daily charts suggesting a trend reversal.

 

The daily momentum indicator has a positive crossover which is a buy signal. Thus, both price and momentum indicator suggests that the upmove is likely to continue towards 24,756 – 25,000 which coincide with the 40-day average and the 38.2 per cent Fibonacci retracement level, Jatin added.

 

The Bank Nifty, meanwhile, lagged the benchmark Nifty in terms of gains on Wednesday. The Banking index ended 0.5 per cent higher with 2.8 per cent addition in open interest.

 

The Bank Nifty continued its upward movement but formed a doji, hinting potential indecision. The index has moved above the 50 per cent Fibonacci retracement level, placed at 52,300, with the next resistance at 52,850, aligning with the 61.8 per cent, says Om Mehra, Technical Analyst at SAMCO Securities.

 

The hourly chart displays a sustained bullish trend. The daily RSI holds steady around the 55 mark, indicating stable momentum. The support remains at 51,900, the analyst added.

 

Hrishikesh Yedve believes that as long as the Bank Nifty holds 50,865, the relief rally will continue. If the index sustains 52,580, the rally could extend to 53,000-53,500 levels.

 

Key Insights from Nifty, Bank Nifty options data

 

The November series options data suggests strong support placed at 23,950 spot levels on the Nifty; with resistance placed at 24,700, above which a strong rally can be expected, says Sahaj Agarwal, Senior Vice President, Head of Derivatives Research at Kotak Securities.

 

Despite the recent recovery, the Nifty options data shows caution among traders. Call writing remains dominant, reflecting a largely bearish stance, with open interest highest at the 25,000 Strike Call and the 24,000 Strike Put, explains Dhupesh Dhameja, Technical Analyst at SAMCO Securities

 

Trading activity is focused in the 24,500 - 24,800 Call range and 24,000 - 24,300 Put range, indicating resistance around 24,500 and support near 24,000. Increased put writing in the 24,000-24,300 range suggests buyers are betting on higher prices, while a reduction in call positions points to emerging bullish momentum. The 'max pain' level stands at 24,400, Dhupesh added.

 

In the case of Bank Nifty, the options data reflects a bearish sentiment. The majority of the trading activity is concentrated in the 52,400 – 52,800 Call range and the 52,000 – 52,300 Put range, pointing to resistance near 52,500 – 52,600 and support around 52,000. 

 

The Put-Call Ratio (PCR) has declined from 1.05 to 0.72, reflecting a shift towards a cautious outlook as call writers reinforce their hold. The 'max pain' level is positioned at 52,300, Dhupesh said.

 

FII v/s Retail v/s Proprietary traders: Who is bullish/ bearish?

 

Foreign institutional investors (FIIs) were net sellers of index futures worth Rs 482.39 crore in a rising market on Wednesday. FIIs net sold 11,860 contracts of Bank Nifty futures to the tune of Rs 936.04 crore; where net bought 5,548 contracts of Nifty futures for Rs 341.38 crore and 1,868 contracts of MidCap Nifty futures worth Rs 118.20 crore.

 

The NSE F&O data shows that the FIIs open interest (OI) in Nifty futures increased in 3.7 per cent; Whereas, OI in Bank Nifty and MidCap Nifty futures dipped by 1.9 per cent and 3.4 per cent, respectively.

 

Pursuant to which, FIIs long-short ratio in index futures remained steady around 0.35. This ratio still implies that FIIs hold near about 3 short positions in index futures for every bullish trade.

 

Meanwhile, retail investors' continue to hold most bullish bets in index futures at 2:1 ratio - meaning 2 long positions for every bearish trade. Proprietary traders, on the other hand, hold the opposite position with 2 bearish bets for every long trade.