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Nifty unlikely to hold much hyped support of 16000

ICICI Securities 26 May 2022

Commentary

In the past few sessions, the Nifty has been finding support near 16000, which is the highest Put base. However, it remained in a range and the Call writing quantum continued to remain higher with no respite in the volatility index, which remained on the higher side. Sectorally, IT continued to remain a laggard and was witnessing short rollover for June. Other sectors like cement, realty and metals also witnessed follow up selling with few attracting fresh shorts.

 Major option concentration:

Major Call OI: 16000 (68.95 lakh), 16100 (72.89 lakh) and 16200 (42.8 lakh)

Major Put OI: 16000 (11.78 lakh) and 15800 (38.8 lakh).

Outlook:

 Despite starting the day on a positive note, the Nifty failed to maintain follow up momentum and reverted from higher levels. In the process, it violated its highest Put base of 16000 in today’s session. Now, for the major part of April and May series, whenever, the index has broken the sizeable Put bases, the Call writing quantum has increased and on a net basis the Call writers has made money. We feel aggressive Call writing quantum is placed now in 16000 strike followed by higher strikes. The Nifty is unlikely to move above 16000-16040 whereas on the downside it should test 15750. A similar sell-off is expected in the Bank Nifty, which should test its highest Put base of 34000.

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