F&O: Lower volatility helping the bulls in tug of war with the bears

By Chandan Taparia

Nifty opened positive on Friday and remained in a range of 120 points during the session with comparative choppiness as follow-up was missing above the psychologically important 13,000 mark. There was a tug of war between the bulls and the bears, but the second half of the session was taken over by the bears as the index closed with a marginal loss of around 20 points.

The December F&O series started off on a negative note, but good attraction was seen in midcap and smallcap stocks, which drove to market momentum. The index formed a small bearish candle on the daily chart and a Doji on the weekly chart, which indicated a consolidative move with the emergence of buying interest on every decline.


Now, Nifty has to hold above 12,900 level to witness a bounce towards 13,150 and then 13,250 levels, while on the downside, support exists at 12,800 level.

India VIX slipped 1.01% from 20.2 to 19.8 level. Lower volatility suggests the bulls are holding a grip and every decline triggered buying in the market.

Since it is the beginning of new derivative series, the option open interest lay scattered at different strike prices. On the option front, maximum Put open interest stood at 12,000 level followed by 13,000, while maximum Call OI was at 13,000 followed by 13,500 levels. Options data suggested a wider trading range between 12,500 and 13,500 levels.

Bank Nifty opened positive and consolidated in a range between 29,400 and 29,700 levels, and concluded the day with a marginal gain of around 60 points. It formed a Doji candle on the daily and weekly charts, but continued to form higher highs and lows for last four weeks. Now, the index has to hold above 29,200 level to witness a bounce towards 30,000 and then 30,300 levels, while support exists at 29,000 and 28,800 levels.

Nifty futures closed negative at 12997 level, with a marginal loss of 0.20 per cent. The trade setup looked positive in MGL, IGL, L&T Finance, Cadila, Cummins India, Chola Finance, TVS Motor, Voltas, Tata Power, Manappuram, Tata Consumer, Bata India and Divi’s Labs but weak in McDowell, IndiGo, BPCL, HPCL and Pidilite Industries.

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