F&O: Rising volatility, falling PCR suggest tight bear grip on market

By Chandan Taparia

The Nifty50 index continued its weakness into the fifth consecutive session on Monday and saw the lowest daily close in 43 sessions. It failed to surpass its hurdle at 11,171 and continued its weakness towards 10,950 level.

The index witnessed sustained selling pressure for most part of the session and corrected around 200 points from previous day’s close. The index has been forming lower tops and lower bottoms and closed below its rising trend line by connecting the swing lows of 9,952, 10,557 and 11,100.


As long as Nifty holds below 11,080, weakness could continue and take it towards the recent swing lows at 10,866 and 10,850 levels, which is the 50 per cent retracement of the entire upward swing from 9,952 to 11,760 levels.

On the options front, maximum Put open interest was at 11,000 followed by 10,800 while maximum Call OI was at 11,500 and then 11,200 levels. There was Call writing at 11,000, 11,100 and 11,200 levels, while meaningful Put writing was seen at strike price 10,800.

India VIX moved up sharply by 12.15 per cent to 17.42 and it is now at highest level in seven months. Rising volatility with a falling Put-Call ratio suggested that the bears are holding a tight grip on the market.

Bank Nifty continued its weakness and formed a fresh monthly low at 24,904 level. It has been making lower tops and lower bottoms for last five sessions and resistances are gradually shifting lower. As long as it holds below 25,500, weakness could continue towards 24,750 – 24,500 zone, while major hurdles are seen at 25,650 and then 26,000 level.

Nifty futures closed in the negative at 11,000 with a loss of 1.49 per cent. Long buildup was seen in TCS, HCL Tech, UBL and Torrent Power while shorts were seen in TVS Motor, MindTree, Manappuram, Idea, Muthoot Finance, Motherson Sumi, Dabur and Indiabulls Housing Finance.

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