The Nifty 50 held on to the 21,700 level throughout the week ended February 9 and closed lower at 21,783, down 71 points or 0.33 percent during the week largely due to major corrections on RBI policy day.
The index cracked nearly 1 percent and Bank Nifty cracked 1.76 percent on February 8 after the Reserve Bank of India (RBI) policy announcement. The RBI decided to keep the interest rates unchanged for the sixth consecutive time. This is also the longest pause in the rates since 2008.
The India VIX, known as the fear indicator, rose from 14.69 on February 2 to a high of 16.33 on February 9 before settling at 15.44. The rise in India VIX gave serious discomfort to the bulls.
The implied volatility percentile (IVP) of Nifty stood at 89 percent. The implied volatility (IV) of Nifty is 14.5. The IVP of 89 percent indicates that 89 percent of the times in the last 1 year, the IV of Nifty traded below 14.5 and only 11 percent of the times in the last 1 year the IV of Nifty traded above 14.5. The current IV of Nifty, which is 14.5, is still trading at the higher range of the historical volatility and any rise further can lead to bulls exiting the markets.
The foreign portfolio investors (FPIs) Long-Short ratio moved from 32.50 percent on February 2 to 37.31 percent on February 6 as the FPIs liquidated short positions and built long positions in Index futures. The two days of the week say FPI’s reversing the initial trend with them squaring off long positions and steadily building short positions. The Long-Short ratio stood at 34.21 percent on February 9 and they still hold more short positions relative to long positions in Index futures.
The Put-Call Ratio (PCR) remained steady throughout the week moving from 1.18 on February 2 to 1.23 on February 9. Both the Call & Put writers battled out fiercely throughout the week and the PCR trend remained steady.
The derivative data indicators have turned slightly negative compared to the previous week. Nifty failed to break past the 22,000 level convincingly. On the other hand, the 21,700 level of the downside acted as strong support.
Despite the ups and downs this week, Nifty is fairly traded in a range and lacks clear direction at the moment.
The maximum Call open interest is placed at 22,000 strikes, while the maximum Put open interest is placed at 21,500 strikes. These are the key levels to track in the upcoming week. If the Put writers exit from the 21,500 strikes, the Nifty may extend its fall further until the 21,150 level, where its next support is placed.
A strong close below 21,135 can trigger a short-term correction in the Index. Nifty is likely to resume an uptrend upon Call writers exiting from the 22,000 strike.
