Bank Nifty Expiry: Options market reflects 47,600 level to be crucial

Equity markets opened lower on Wednesday but pared all the losses to trade in the green by noon. The benchmark Nifty 50 and the Sensex were trading 1.79% higher by 12:00 p.m.

The Bank Nifty index, which has its expiry on Wednesday, gained 1.27% to trade at 47,523 at 12:00 p.m.

The options market is currently factoring in an immediate resistance at the 48,000 level with the highest open interest on the call side amongst closer-to-the-money options amounting to 38.4 lakh at this strike. The change in open interest for the strike stood at 25.8 lakh at 12:00 p.m. On the downside, the market is reflecting a support at the 47,000 level with the Put options at this strike having an open interest of 30.1 lakh at the time of writing. The change in open interest stood at 20.2 lakh.

The max pain of Bank Nifty stood at 47,600 at the time of writing. The max pain theory shows the level at which option sellers are likely to have the least loss on expiry. However, it is noteworthy that this level is dynamic and keeps shifting when the market moves significantly in either direction.

Chart check

On a 15-minute chart, the index continues to trade above its 21-period & 50-period exponential moving averages (EMAs). The index reflects a put-call ratio (PCR) of 0.68 which indicates it is in an oversold area. PCR is the ratio of the number of puts to the number of calls of an asset. It is noteworthy that in extreme downward market movements, the PCR has gone as low as 0.5 or sometimes even below 0.5 only to revert slightly to the mean.

India VIX, an index that reflects the anticipated volatility in the market over the next 30 days, crashed over 27% on Wednesday to 19.43 following the election results outcome.

HDFC Bank, which constitutes 29.42% of the index, was trading 1.9% higher on Wednesday while ICICI Bank, which has a weight of 23.33%, was trading 0.6% higher. Axis Bank was trading 0.6% higher while State Bank of India was trading lower by 1.45%. Kotak Bank shares were trading higher by 3.72%.