Week Ahead: F&O Markets Expects Nifty 50 To Trade Between 10,700 And 11,500 

Futures and options traders expect Nifty 50 to hover around 11,000 points next week even as the benchmark resumed its decline in a truncated week ended Aug. 16.

The 11,000 call and put options expiring on Aug. 29 have the highest open interest in the F&O market, showing that most traders expect the Nifty to trade around that level. The 10,700 put and 11,500 call were the second-most outstanding contracts on the lower and the higher end, respectively, indicating that the market expects the index to stay within that range.

Nifty 50 has been finding multiple support near to 10,900 zones from last three sessions while finding hurdle at 11,150, said Chandan Taparia, associate vice president at Motilal Oswal Securities. “The index is turning up after the decline of 1,200 points so a hold around 11,000 zones could see a bounce-back towards 11,250-11,333 zones.”

Nifty put-call ratio fell below one on Tuesday indicating markets were in the oversold territory, but the reading bounced back amid more put writing.

The truncated week with only three trading sessions witnessed heightened volatility, owing to global factors like trade and currency war to now inversion of yield curve—seen as a precursor to a recession—in U.S. The India Volatility Index rose 5 percent, with both Nifty and Bank Nifty trading below their 200 daily moving averages.

Indian equity benchmarks recorded their fifth decline in six weeks. The S&P BSE Sensex closed 0.62 percent lower this week at 38,350.33 and the NSE Nifty 50 dropped 0.56 percent to close at 11,047.80.

“The Nifty seems to be oversold, indicating a rather limited downside for the time being and the range remains between 10,800 and 11,200 while a close above 11,200 could open the doors for a move to 11,234, 11,340 and in a most optimistic scenario, 11,400,” Hemen Kapadia, technical research analyst at KR Choksey, told BloombergQuint. “This recovery would be a bounce, not a rally while support on the downside comes in at 10,979, 10,878, 10,783. It’s a sell on bounce market, selective of course while sectors like auto, banks and metals could spring a positive surprise.”

Nifty futures declined 0.5 percent during the week whereas the Nifty Bank futures declined 0.8 percent.

Short bets by foreign investors rose from 59 percent at the start of the series to 70 percent amid volatility in the environment. They turned net sellers in the Indian market in July after five months.