Quantitative data set up: Cool-off in volatility after spike provides strength to market

© Nishant Kumar Quantitative data set up: Cool-off in volatility after spike provides strength to market

Greed and Fear Indicator: Cool off in volatility after spike provides strength in the market (VIX CMP – 19.96)

India VIX was up by 7.19 percent from 18.62 to 19.96 levels on week-on-week basis but cooled off from its Monday’s highs of 23-24 zones. Volatility spiked near to its four weeks high but cool down in the latter part of the week from higher zones have given a support for a decent bounce back move and now it has to hold below 19 zones to continue the bulls grip in the market.

CBOE VIX: CBOE VIX was down by 0.18 percent from 21.57 to 21.53 levels. Volatility rose during the week but came down to lower levels giving support at current juncture.

Fund Flow: FIIs continue their holiday shopping

FIIs broke their buying streak as the week started but continued their buying momentum in the week and bought worth Rs 2,591 crore. DIIs, on the other hand, had an offsetting position and sold worth Rs 3,400 crore during the week. The Long Short Ratio ranged from 65.6 percent to 69.1 percent in the week to close the week at 67.94 percent. On the FIIs derivatives front, there was long built up in index futures and short covering in stock futures.

Safe Haven: Gold concluded slightly below 50,000 levels after a volatile week (Gold, MCX CMP – Rs 49,787 per 10 grams)

Gold was slightly lower by 0.62 percent on weekly scale but continues its formation of higher highs from the last three weeks. Gold was quite volatile throughout the week and closed lower as the week concluded even after a recovery following Wednesday’s dip. Investors were optimistic about the effect of the US stimulus but strengthening rupee results in capped upside. It is trading below its 100 DMA.

Among other precious metals, silver was down by 0.57 percent this week.

Option Data: Nifty trading range shifts higher in between 13,500 to 14,000 (Nifty CMP – 13,749, Bank Nifty CMP – 30,402)

Nifty futures closed the week with marginal loss of 0.07 percent with reduction in futures Open Interest (OI) by 7.68 percent on a weekly basis which indicates shorts are being covered. During the week, Put Call Ratio (PCR) based on Open Interest of Nifty moved in between 1.12 to 1.75 levels and closed the week at its higher band.

On option front, maximum Put open interest is at 13,000 followed by 13,500 strike while maximum Call open interest is at 14,000 followed by 14,500 strike. Call writing is at 14,000 then 14,200 strike while Put writing is at 13,700 then 13,600 strike. Option data suggests an immediate trading range in between 13,500 to 14,000 zones.

Bank Nifty futures closed the week with losses of 0.97 percent with reduction in Open interest by 1.65 percent on a weekly basis which suggests longs are being liquidated in the banking index. Put Call Ratio based on Open Interest of Bank Nifty remained in between 0.62 to 1.04 and it closed at its higher band. IV of Banking index decreased to 22.5 levels as the week concluded. For weekly Bank Nifty, Maximum Put open interest is at 29,000, while maximum Call OI is at 31,000. We have seen major Call writing in 33,000 and 32,000 while Put writing is witnessed at 30,000 and 30,500 strikes.

India Rupee: Rupee gaining strength and stability (USD/INR CMP – 73.54)

The USD/INR pair was marginally down by 0.04 percent and continued its downward movement after Monday’s spike. The index breached its 50 DMA on daily scale and breached its lower highs formation after four weeks. Strength in the equity market would keep the depreciation of the Rupee limited which indicates capped upside.

Crude Oil: Oil moving in a range (Crude Oil WTI, MCX CMP – Rs 3,554 per barrel)

Oil was down by 1.17 percent on week-on-week basis and traded flat on weekly basis. Oil price rose in the week and settled slightly lower but optimism in the vaccine continues as investors’ hedge into oil.

DJIA: US Indices consolidates in a range (DJIA CMP – 30,200)

The Dow Jones was marginally up by 0.07 percent on week-on-week basis but continued moving in a range on daily and weekly scale. It continued to rise with optimism but delay in the stimulus package for the virus keeps the upside capped.

Moving forward, Nifty has to continue to hold above 13,600 to witness a fresh rally towards new life time high of 13,850 then 14,000 zones while on the downside major support exists at 13,500 and 13,333 levels. Bank Nifty has to continue to hold above 30,200 to witness an upmove towards 31,000 and 31,200 while on the downside support is seen at 30,000 and 29,800 levels.

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