Nifty Fin Service Expiry: Options market reflects 22,000 level to be crucial

Equity markets opened lower on Tuesday but pared the losses by Tuesday noon. The benchmark Nifty 50 was trading 0.07% higher on Tuesday at 11:54 a.m. while the Sensex was trading flat.

The Nifty Financial Service index, which has its expiry on Tuesday, traded flat at 21,977 at 11:54 a.m. The options market is currently factoring in a resistance at the 22,000 level with the highest open interest on the call side amounting to 1.26 crore at this strike. The change in open interest for the strike stood at 1.14 crore at the time of writing.

The market’s support, too, stands at the 22,000 level, indicating anticipation of a flat trading session as it inches closer to the election results announcement. Put options at the 22,000 strike have an open interest of 1.2 crore at the time of writing. The change in open interest stood at 1.07 crore.

The max pain of Nifty Financial Services stood at 22,000 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.

On a 15-minute chart, the index is trading below its 21-exponential moving average (EMA) and closer to the 50-EMA.

India VIX, an index that reflects the anticipated volatility in the market over the next 30 days, rose over 4.44% on Tuesday to 24.22. As the market moves towards the election results day, volatility is expected to rise.

The index reflected a put-call ratio (PCR) of 0.87 which indicates mildly bullish to neutral sentiment. 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.

HDFC Bank, which constitutes 31.12% of the index, was trading 0.35% higher on Tuesday while ICICI Bank, which has a weight of 21.99%, was trading 0.16% lower. Axis Bank was trading 0.36% lower while State Bank of India was trading 0.47% lower. Kotak Bank shares were trading down by 0.02%.