Nifty 50 (20,192) and Bank Nifty (46,232) appreciated 1.9 per cent and 2.4 per cent respectively and posted yet another weekly gain. The bullish momentum appears strong, and the futures and options (F&O) data substantiate the same. Below is the analysis of derivatives data of both indices.

Nifty 50

The September Nifty futures gained for the third week in a row and ended at 20,250. So, last week it gained 1.9 per cent. As the contract rallied, the cumulative Open Interest (OI) of Nifty futures on the NSE shot up to nearly 126 lakh contracts on September 15 compared with 111 lakh contracts on September 8. This indicates fresh long build-up and the probability of a rally from here is high.

Likewise, the options data too paints a bullish picture. The Put Call Ratio (PCR) of weekly options stand at 1.1 and the PCR of September monthly options stand at 1.5. A value more than 1 shows more put options have been sold when compared with call options and this means, participants are not expecting a fall if not a rally. As per options chain, there are strong supports at 20,100 and 20,200.

Considering the overall F&O data, the signal is bullish. Therefore, traders can consider buying Nifty futures. Those who are holding longs can continue to hold. Option traders can consider buying call options preferably at-the-money (ATM) options from October series. Alternatively, one can implement a bull call spread strategy in the current series.

Derivative outlook

Nifty futures see long build-up again

Short covering in Bank Nifty futures continue

Options indicate Nifty 50 is more bullish

Bank Nifty

The September expiry Bank Nifty futures posted a gain for the fourth week in a row. It outperformed Nifty futures as it rallied 2.1 per cent and ended at 46,288. But unlike in Nifty futures, the cumulative OI of Bank Nifty futures on the NSE dropped – it fell to 20.5 lakh contracts on September 15 versus 23 lakh contracts on September 8. A rise in price along with a fall in OI suggest short covering.

The PCR of weekly Bank Nifty options stood at 1 and the same for monthly options stood at 1.1 on Friday. The number of call and put options sold are nearly equal and this does not give a clear bias.

As per option chain, the nearest resistance for the contract can be spotted at 46,500 and the chart shows that there is a barrier at 46,600. Thus, 46,500-46,600 is the nearest resistance band and thus, the chances for a rally is high. On the other hand, 46,000 is a strong support.

Given the above, participants can execute bullish strategies. Based on one’s risk appetite, Bank Nifty futures or Bank Nifty call options can be bought. With respect to options, our suggestion is to consider ATM October call options.

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