F&O expiry- Nifty likely to rally if it holds above 18500 support; look for buying opportunities near support zone

F&O expiry: Nifty likely to rally if it holds above 18500 support; look for buying opportunities near support zone

By Ruchit Jain

In last one week, the Nifty has seen some correction from the high of 18887 to 18530. This correction mainly seems due to unwinding of long positions as the markets had reached the overbought zone. However, Nifty has not broken its important support zone of 18500-18450 yet, which is a sacrosanct for the near term. The Bank Nifty index witnessed some time-wise correction in last one week where the index traded in a narrow range, but it again witnessed buying interest on the weekly expiry and thus it resumed its uptrend to clock a new high of over 43600.

If we look at participant-wise F&O data, it is seen that the Client section has not formed any significant directional positions in the index futures and hence their ‘Long Short Ratio’ is just above 50 percent. FII’s had formed significant long positions recently where they had about 75 percent of positions on the long side on 1 st December. However, they unwound some of their long positions last week and hence their ‘Long Short Ratio’ has declined from 75 percent to 60 percent now. This indicates long unwinding by the stronger hands which may be due to profit booking at higher levels. Also, since their activity generally becomes muted in the later part of December month, we may not see significant build-up of fresh positions in this series.

Also Read: NSE F&O ban: GNFC and others under ban on Friday, December 9, 2022

In options segment, the at-the-money (18600) call and put has decent open interest outstanding for the coming weekly series. In the near term, 18500-18450 will be seen as a crucial support for Nifty and till this is not breached, the index could see another leg of a short-term upmove. Hence, traders can look for buying opportunities near the support zone. However, one should place stoploss on long positions below 18450 as a close below the same could then result into a price-wise corrective phase. On the higher side, 18800 would be the immediate resistance to watch out for followed by 19000.

(Ruchit Jain is the Lead – Research at 5paisa.com. The views expressed are the author’s own. Please consult your financial advisor before investing.)