F&O: Declines are getting bought into, but followup buying missing

NSE Nifty opened on a positive note on Thursday, but failed to surpass its previous day’s high and consolidated in range of 50 points for most part of the session. The index formed a bearish candle on the daily scale, but supports were intact at lower levels, which may attract buying on declines.

The headline index gave a consolidation breakout in the previous session, but followup buying was missing to drive the momentum. Now, it has to continue to hold above 12,150 to witness an upmove towards 12,280 and then 12,350, while major support has shifted to 12,000.

On the options front, maximum Put open interest was at 12,000 followed by 11,800 strike, while maximum Call OI was at 12,500 followed by 12,400 strike. Put writing was mainly seen at 12,000 and 12,200 strike while minor Call writing stood at 12,400 and then 12,300 strike. Option data indicates a wider trading range between 12,000 and 12,400 levels.

India VIX fell 1.84 per cent to the 13.37 level. Volatility has been cooling off from the last two weeks, which is supporting bulls and and ‘buy on decline’ strategy in the market.

Bank Nifty relatively underperformed, and formed a Bearish Engulfing candle on the daily scale. The index has taken out the gains of the last two sessions, and closed near its 50-DEMA. It is finding a hurdle near the 31,500- 31,600 zone, while support at 31,100. Now it has to continue to hold above 31,200 to extend move towards 31,500 and then 31,750, while on the downside, major support exists at 31,000-30,900.

Nifty futures fell 0.52 per cent to 12,164. Long builtup was seen in Torrent Power, Torrent Pharma, Shriram Transport Finance, Dr Reddy’s and Titan, while shorts in IGL, MGL, NMDC, Indusind Bank and Tata Steel.

(Chandan Taparia is Technical & Derivative Analyst at MOFSL. Investors are advised to consult financial advisers before taking an investment calls based on these observations)