April F&O expiry: Nifty eyeing a narrow trading range

Equity markets have been volatile of late, given the turmoil in global markets. The ongoing Ukraine crisis, high commodity prices and a likely onset of higher interest rate regime have kept bulls on the sidelines.
 
Back home, disappointment on the earnings front have also plagued select stocks, thus adding to the woes.
So far in April the NSE Nifty has swung in a wide range of nearly 1,300 points. From a high of 18,115, the index dropped to a low of 16,825, before recouping some of its lost ground.
Still, the index is down over 3 per cent on a month-to-date basis.

Among the Nifty 50 stocks Mahindra & Mahindra, Adani Ports, NTPC, Eicher Motors and Shree Cement have been the major gainers so far, while Hindalco, Tech Mahindra, Infosys, Wipro and Bajaj Finserv are the major losers.

According to Kunal Shah, Senior Technical & Derivative Analyst, LKP Securities, April F&O series was one of the most volatile series in recent times. It saw selling pressure at higher end on Nifty and Nifty Bank, while Lower Top, Lower Bottom formation was seen on charts.

Now, the stage is set for a tug-of-war between the bulls and bears on the expiry day.

As per the options data, the highest open interest is seen in 17,500 Call and 17,000 Put. Higher open interest in Call indicates resistance and vice versa in case of the Puts.
On Wednesday, the 17,000 and 17,100 Calls saw significant build-up in open interest. And, at the same time, the 17,000 Put saw heavy addition.

This trend suggests investors should brace themselves for a fierce tug-of-war in the range of 16,950-17,150.
A significant breakout on the lower side of the range can trigger a sharp sell-off. On the other hand, a sustained trade above 17,150 can trigger a short-covering rally.

According to Manojh Vayalar of Religare Broking with FIIs focussed more on index options, volatility could be high today. 
A close above 17,250 on the Nifty and above 36,500 on the Bank Nifty can lead to over 400 points and 1,200 points rally on both the indices during the first week of May.

Meanwhile, apart from the F&O expiry induced volatility, markets may eye global cues for further trajectory.
Moreover, stock specific action amid Q4 results season will remain high. Shares of Ambuja Cements, Axis Bank, Bajaj Finserv, Biocon and Vedanta are likely to be in focus as the companies are scheduled to announce their Q4 earnings.

The primary market, too, will see some action with the ongoing IPOs of Campus Activewear and Rainbow Children’s Medicare.
Further, the mega 21,000 crore rupees LIC IPO shall open for subscription on May 4, next week.

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