F&O: Nifty setup still looks pretty bullish, but rising VIX is a concern

Nifty opened flattish on Tuesday and surged throughout the session after a slight dip in the initial hour of trade, heading towards a new lifetime high of 14,590. The bulls have been on the go relentlessly, and are touching new highs every session. The index witnessed some consolidation in the last hour of the session, but finally settled with a gain of around 90 points.

The index formed a healthy bullish candle on the daily scale and continued to form higher highs for the last 14 sessions. Now, it has to hold above 14,400 level to witness a fresh move towards 14,750 and then 15,000 levels, while on the downside, major support exists at 14,300 and 14,200 levels.

India VIX rose 2.09% from 22.38 to 22.84 level. Volatility is moving up because of rising implied volatility in Calls and needs to cool down below 20 level to form a higher market base.

On the Options front, Maximum Put open interest stood at 14,000 level followed by 13,000, while maximum Call OI was seen at 15,000 and then 14,000 levels. There was Call unwinding at all immediate strike prices while minor Call writing was seen at 15,000 and Put writing at 14,500 and 14,400 levels. Options data suggested a wider trading range between 14,000 and 15,000 levels, as the immediate trading range stood between 14,300 and 14,800 levels.

Bank Nifty opened negative, but saw a quick recovery in the initial half of the session, taking support at the 31,750 level. The second half of the session saw rangebound trade. The banking index settled with a gain of nearly 340 points. It formed a Bullish Engulfing candle on the daily chart and saw the highest daily close. Now, it has to hold above 32,000 level to witness a bounce towards 32,613 and 33,000 levels, while on the downside support exists at 31,750 and 31,500 levels.

Nifty futures closed positive at 14,596 level with 0.74% gains. The trade setup looked positive in Tata Motors, Bank of Baroda, Tata Chemicals, Ashok Leyland, PEL, Chola Finance, Eicher Motor, Coal India, SBI, Exide Industries, Bharti Airtel, Wipro, Federal Bank, Escorts, HDFC Bank, Hero MotoCorp, Bharat Forge, IGL and ICICI Bank but weak in Titan, Nestle India, HUL, Kotak Bank, Divi’s Labs and IndiGo.

(Chandan Taparia is Technical & Derivative Analyst at MOFSL. Investors are advised to consult financial advisers before taking an investment calls based on these observations)