F&O Manual | Nifty trades in the red, sees heavy call writing at 19,800 strike

India’s benchmark indices opened in the red amid mixed global cues on September 25. Sectors like auto, banking, metal, and realty saw some buying activity, while selling pressure was evident in the capital goods, IT, and power sectors in the morning trade.

“The Nifty came under selling pressure last week on global cues and heavyweights, especially from the BFSI space, led the index to move below the 19,700 levels. Despite buying seen among technology heavyweights, the Nifty lost nearly 2.5 percent last week. Even broader markets saw some profit-booking, where both midcap and smallcap indices closed the week with nearly 2 percent losses,” ICICI Securities said. Going ahead, the brokerage house expects that the Nifty may find it tough to move beyond its volume weighted average price (VWAP) of 19,900 in the settlement week.

Bars reflect changes in open interest (OI) during the day. The red bars show call option OI and the green put option OI.

Options data suggests a sideways-to-negative momentum for the day, as heavy call writing at the 19,800 strike level forms a strong resistance. “The Nifty mostly had time-wise corrections in recent months but it has retraced half of the up move i.e. 19,200-20,200+ this time. Besides, it has also slipped below the short term moving average (20 EMA) and holding below the same. It may result in possible consolidation in the index with the bias on the negative side,” Ajit Mishra, SVP – Technical Research at Religare Broking, said.

Mishra expects the Nifty to hold the 19,200-19,550 zone, while the 19,900-20,100 level would attract selling. He advised participants to have a stock-specific approach and maintain positions on both sides.

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Among individual stocks, SBI Life, CumminsInd and RecLtd saw a bearish setup, while BajajFinance, MCX and Balramchin saw a long build-up.

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