F&O: Declines are getting bought, but spike in the VIX is a worry now

Nifty opened positive on Thursday but failed to hold its opening level and fell sharply by around 235 points to 15,513 level in the first few hours of the session. However, the bulls managed to hold the decline and it witnessed a strong recovery of 200 points from lower levels to close the session above 15,700 level.

The index formed a bearish candle on daily scale with long lower shadow, indicating that every decline was quickly bought. It has been forming lower highs since the last three sessions but is now holding above its 50 DMA. Now, it has to hold above 15,700 level to witness a bounce towards 15,800 and 15,850 levels while on the downside support exists at 15,600 and 15,500 levels.

India VIX moved up 3.50 per cent from 13.23 to 13.69 level. Volatility has seen a sharp spike towards the 16 level during the day, as the index broke all immediate support and fear was seen among traders. Now VIX has to cool down below 12 zone to again get a bullish stance for the market.

On the options front, maximum Put Open Interest stood at 15,500 level followed by 15,600 strike, while maximum Call OI was seen at 15,800 followed by 15,900 strike. There was Call writing seen at 15,700 and then 15,750 levels while minor Put writing was seen at 15,550 and othen 15,600 level. Options data suggests a broader trading range between 15,600 and 15,850 level.

Bank Nifty opened positive, but selling pressure pulled the index towards its lowest level of last 26 sessions at 34,100 level. It saw a slight recovery, but overall the bears ruled the banking index and closed with a loss of around 260 points. It formed a bearish candle with a long lower shadow and negated the formation of higher highs of the last four sessions. Now, it has to hold above 34,500 level to move up towards 34,750 and 35,000 levels, while on the downside support exists at 34,250 and 34,000 levels.

Nifty futures closed negative with a loss of 0.17 per cent at 15,708 level. On stocks front, bullish setup was seen in Bharti Airtel, BEL, SAIL, Tata Steel, Divi's Lab, JSW Steel, ACC, Bajaj Finserv, Bata India, ICICI Bank, Naukri, Ultratech Cement and Berger Paint but weak Canara Bank, M&M Financial, Cadila, Kotak Bank, Dr Reddy, LIC Housing Finance, L&T Finance, Tata Motors, M&M, PNB, BHEL and RBL Bank.

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