F&O Tracker: Nifty 50 and Nifty Bank Hit New Highs with Bullish F&O Data

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Defying the odds, well, the technical, Nifty 50 (19,189) and Nifty Bank (44,747) both rose sharply and hit a new life high last week. The value of the first amounted to 2.8 percent, while the second rose by 2.6 percent in the cut off week.

The fresh breakout looks strong, and futures and options (F&O) data indicates bullish positions by derivatives participants. Therefore, we expect the rally to continue this week. Below is a breakdown of the F&O data.

Nifty 50

Nifty 50 July futures posted a weekly gain of 2.5 percent as it closed at 19,261 on Friday. Interestingly, the cumulative open interest (OI) fell to 110.2 lakh contracts on June 30 as against 117.8 lakh contracts on June 23. But remarkably, it was steadily increasing through Wednesday.

Therefore, Nifty futures witnessed a new long build-up until the middle of the week and witnessed large short-covering on Friday. However, the general bias is bullish.

The series of options contracts expiring on July 6 shows the put-call ratio (PCR) standing at 1.64. Also, the PCR rate for the July monthly contract held steady at 1.34 on Friday. Thus, there was a much higher selling of put options when compared to selling of put options. 19000- and 19100-stroke have a very distinct OI level. This means that even if there is a decline, these levels are likely to limit the downside.

Traders can consider buying put options as the probability of an upward movement is high. Those with a high appetite for risk can buy into Nifty futures contracts. But one should be prepared for a possible temporary decline after last week’s sharp rally, which could be seen as a buying opportunity.

What does the data say

Covering large short positions in futures for both indices

PCR options for Nifty 50 and Nifty Bank are showing bullish trend

Fundamental indicators see a strong breakout

Nifty Bank

Nifty Bank July futures rose 2.3 percent closing at 44,851 on Friday. Thus, the contract has gone out of range, opening the door for further rally. As in the case of Nifty futures, Nifty Bank futures also saw new long positions arriving on Wednesday and saw massive short cover on Friday.

So, on a weekly basis, there was short covering as the cumulative OI of Nifty Bank futures contracts stood at 27.7 lakh contracts on 30th June as against 28.7 lakh contracts on 23rd June. However, the general slope is bullish.

The PCR of options expiring July 6 settled at 1.46 on Friday, showing more writing, which is positive for the bulls. The 44,500 put option saw a massive sell-off, which means this could be a strong support for Nifty.

Given the general upside, traders can buy call options or Nifty futures contracts according to the individual’s risk appetite.