Fin Nifty Expiry: Options market reflects 21,600 level to be crucial

Equity markets opened higher on Tuesday but registered losses soon after to continue the declining trend seen since the end of last week.

The benchmark Nifty 50 was trading 0.78% lower on Tuesday at 11:52 a.m. while the Sensex was trading 0.66% down.

Resistance & Support based on OI

The Nifty Financial Services index, which has its expiry on Tuesday, declined 0.9% to trade at 21,553 at the11:52 am . The options market is currently factoring-in a resistance at 21,600 levels with the highest open interest on the call side amounting to 1.04 crore at this strike. The change in open interest for the strike stood at 1.05 crore at 11:52 a.m. On the downside, the market is reflecting a support at the 21,500 Put that has an open interest of 96.3 lakh at 11:52 a.m. The change in open interest stood at 77.2 lakh.

Maxpain suggests 21,600 key level to watch

The max pain of Nifty Financial Services stood at 21,600 as at the 11:52 am. The max pain theory shows the level at which option sellers are likely to have the least loss on expiry.

Chart analysis

On a 5-minute chart, the index continues to trade below its 21-exponential moving average (EMA) indicating short-term weakness. The index is reflecting a put-call ratio (PCR) of 0.7 which indicates mildly bullish to neutral sentiment and in this particular case, a limit to further downside. 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.

Private Banks pull index lower

HDFC Bank, which constitutes 31.12% of the index, was trading 0.78% lower on Tuesday while ICICI Bank, which has a weight of 21.99%, was trading 1.6% lower. Other constituents of the index like Axis Bank and State Bank of India were also trading lower by 1.59% and 1.11%, respectively. Kotak Bank, however, was trading in the green, up 0.4%.