F&O View: Jan expiry likely at 7,400-7,500 levels of Nifty50

NEW DELHI: The Nifty50 kicked off the week on a flat note in morning trade on Thursday, but soon pared the gains and traded with a negative bias, led by losses in Bharti Airtel, ICICI Bank, Maruti Suzuki and L&T.

Going by options data, the expiry of January series derivative contracts is likely to happen in a 100-point range between 7,400 and 7,500 levels, where both Puts and Calls have maximum open interest.

Sustained Call writing and a shift in maximum Put OI from 7,300 to 7,400 level is lifted the support to higher levels. Almost 10.8 lakh contracts were added to the Put option at strike price 7,400, which has a total open interest of 57.48 lakh.

About 4.1 lakh contracts were added to the Call option at strike price 7,500, which took the total open interest to 60.10 lakh, highest among all Call options, followed by strike price 7,800, which has 45.30 lakh contracts, and strike price 7,700, which has 40.39 lakh contracts.

The Nifty50 January 2016 futures closed at 7,433.40 on Wednesday with a discount of 4.35 points over the spot closing of 7,437.75. The Nifty50 futures caught up with a three-month average, while stock futures rollovers lagged the three-month average by 3 per cent.

“The January series saw an increment in open interest in closer strikes such as 7,400 Put option and 7,500 Call option. Option pain (strike with a maximum concentration of Calls and Puts) is developing around 7,400 and 7,500 strikes, indicating the likely expiry range,” said Bhavin Desai, Head of Derivative Research, MOSL.

“A slower pace of stock rollovers may neutralise some of the bearish bias. With fast decaying time value, last day of writing is tempting, but be sure to keep a strict stop loss, at the most, twice the premium one has received,” he said.


Nifty50 has important supports placed at 7,420 and 7,395 levels, and till the time it holds above the 7,450 level, it may see a rebound up to 7,488 and then to 7,511 level.

"A fall below the 7,420 level would give a weak signal towards 7,395 and maximum to 7,365 even in the worst case scenario,” said Chandan Taparia, Derivatives & Technical Analyst - Equity Research at Anand Rathi Financial Services.

“On the derivatives front, highest OI was witnessed in Calls at 7,500, and on the Put side, highest OI was seen at 7,400, which implies that on a broader time frame, 7,365-7,395 range would offer strong support to the current series and strike prices 7,488 and 7,511 would offer strong resistance and act as supply zone,” Taparia said.

The India Volatility Index (VIX), a gauge of the market’s short-term expectation of volatility increased by 4.34 per cent and reached 19.06. It looks like the index is building expectation for a rise in volatility in the final session of expiry.

Technical charts show the intermediate trend has turned downward. Analysts expect selling pressure on every rise. A meaningful rebound in the index will only be seen in the next series on a crossover above the 7,539 level.



“On the daily chart, Nifty50 futures are looking weak. It is trading below 50 and 200 DMAs. It is expected to trade sideways over the next few sessions. It is trading above the important support of 7,400,” said Vivek Gupta, CMT - Director Research, CapitalVia Global Research.

“If it breaches this level, a downward movement till 7,220 can be expected. Its immediate resistance is at 7,480. If this level is crossed, a bullish movement can be expected. The RSI is trading below the 50 level, thus supporting a bearish view,” he said.