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Futures & Options outlook: Stay cautious, Nifty may face selling pressure near 16200-16400 resistance


The options data indicates resistances around 16200 and 16400 levels.

By Ruchit Jain

Post last week’s expiry, we witnessed a gap down opening for our markets and selling pressure was seen throughout the week. Both Nifty and Bank Nifty continue to add short positions in the derivatives segment which added fuel to the ongoing correction. In the middle of the series, the option writers had positioned themselves in 16000 strike in the weekly as well the monthly expiry contracts. As this level got breached on the weekly expiry day (Yesterday), they had to run to cover their positions which resulted into added selling pressure.

Now, the short positions formed are still intact and there’s no respite seen so far. So the trend continues to remain negative for the markets. FII’s have been selling relentlessly in the cash segment as the global markets too have seen sharp sell-off. In the index futures segment, they started the May series with short positions and in fact have added more shorts in this expiry. Their ‘Long Short Ratio’ in the index futures segment stands around 17% which is the lowest in recent times. This clearly shows their bearish bias for the short term. 

On the other hand, the retail trades have ‘Long Short Ratio’ of 62% and it seems they have been reluctant to exit their positions would have resulted in incremental losses. India VIX has also risen gradually to over 24 level. The only data which provides some hopes for a pullback is the PCR-OI which is oversold. Hence, we could see much awaited pullback move in next few sessions, but any such upmove should only be seen as a relief rally within a downtrend.

In the options segment, 16000 put option had decent open interest outstanding but as this level was breached, the put writers had to cover their positions. The options data indicates resistances around 16200 and 16400 levels. Any pullback move towards the resistance is likely to see selling pressure again and hence, traders should continue to stay cautious until there’s change in data. The support for the coming week will be initially seen around 15500-15400 followed by 15000 level.

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

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