FUTURES & OPTIONS

An analysis of the futures & options trends indicate that NSE Nifty 50 index is expected to face resistance at around 18,000-18,200 points this week, and will find support between 17500-17300. With uncertainties around Fed, Budget and global economy persisting, traders appear wary of taking large bets. This implies rangebound action will likely continue into expiry week. Nifty Futures Point to Volatility The current level of Nifty futures reflects only a mild premium to spot Nifty. This indicates traders are not expecting any major upside or downside in the near term. However, the premium has fluctuated widely this month between a discount and premium showing uncertainty in directional bets. Volatility is likely as we head into F&O expiry week. A look at the Put Call Ratio (PCR) and change in open interest of puts and calls provides clues to the market’s view. PCR has risen to 1.2 from around 1.0 indicating some put writing. This put writing was seen at strikes like 17600 and 17700 suggesting traders expect Nifty to stay above this on expiry. The 17600-17900 range is witnessing maximum open interest build up. Heavy put OI stripes at 17500 and 17300 will offer support on downsides whereas call writers at 18100 and 18200 caps upsides. VIX Signals Caution The India VIX index, which tracks expected volatility, has been elevated at 14-16 levels throughout this month compared to sub-13 readings in November. The higher VIX shows increased uncertainty and caution, making traders hesitant to take large directional bets until major events like Fed decision and domestic budget pass. This implies rangebound behaviour rather than uni-directional surge. However, VIX remaining below 20 suggests tentative stability rather than high turbulence. Foreign Flows, Global Cues In the near term, FII flows will be crucial driver of sentiment. This month saw huge divergence with FIIs net selling over Rs. 15,000 crore but DIIs net buying equities worth Rs. 18,500 crore. If FII selling persists, it would cap upside. But sustained buying by domestic funds can offset FII impact. Liquidity conditions during year-end will also decide whether Nifty challenges 18,000 or takes support at 17500. With risk appetite fragile globally, further spikes in US bond yields or hawkish Fed chatter could spark risk-off. Conversely, cooling US CPI or China reopening optimistically would lift market mood. Movement in crude oil prices and USD-INR remains crucial external triggers. Domestically, Union Budget will be an inflection point event on February 1st. Until then, ranged trade is likely. Bank Nifty & Sector Outlook Bank Nifty trend will depend on Q3 results and growth-inflation dynamics. Brokerages estimate around 15% NII growth but higher provisions may hit profits. Loan growth momentum remains strong but asset quality trends need monitoring. Positive surprises on earnings or GDP data can lift banking stocks and Bank Nifty higher towards 43,000 where maximum call OI lies. But downside risks prevail making 38,000-40,000 a likely range. While Nifty rangebounds, stock specific opportunities persist in sectors seeing earnings upgrades like capital goods, manufacturing, automobiles and some financials. Defensives like IT, select pharma may outperform if global turmoil resumes. High beta names in autos, banks and metals will be volatile. Investors should watch key events like Fed meeting, US CPI data and India's budget for cues while remaining nimble across sectors. Avoiding aggressive directional positions and focusing on hedge-based strategies may be prudent near-term.

Tag: FUTURES & OPTIONS

Market Outlook: Nifty 50 seen facing resistance at 18,000-18,200