How is market placed ahead of Budget 2022 and February series? Watch out for these 5 factors

The Nifty50 started the January series on a positive note and headed to 17350 zones in the first half of the series.

It was followed by a steep decline in the last couple of weeks where the index lost all its gains of the previous weeks and tested 16800 zones.

Uncertainties in the global market along with higher volatility ahead of the Union Budget 2022 kept the index quite turbulent.

The Nifty50 concluded the January expiry with marginal losses at 17110 levels and formed a small bodied indecisive candle for the second consecutive series (expiry to expiry chart).

The open interest (OI) activity in the Nifty has increased in the series by 5.06% on an expiry-to-expiry basis. Rollover of Nifty stood at 74.62%, which is lower than its quarterly average of 78.70%.

The short built up was seen in the index which strengthened the bears but recovery seen in the concluding session of the series should wake the bulls and commence the next leg of rally.

The Nifty index witnessed a strong recovery followed by a sharp selloff in the second half of the series with profit booking decline seen in many sectors.

We witnessed good momentum in Banks, Financial Services, Auto and Energy sector while some Profit booking was seen in sectors like IT, FMCG, Realty and Pharma and Infra, Metals and Media remained volatile.

Chandan Taparia, Vice President | Analyst-Derivatives at Motilal Oswal Financial Services Limited decodes market outlook ahead of Budget 2022 and February series:

India VIX:

India VIX increased by 27.10% from 16.56 to 21.06 levels in the January series. Volatility remained comparatively high throughout the month with a spike in the concluding week of the series which explained the roller coaster ride in the market.

It shot up near its 8-months high levels near to 24 zones and needs to cool down for stability in the market.

Foreign Investors:

FIIs continued selling heavily in the cash market segment and cumulatively sold equities worth Rs 32102 crores in the January series.

Domestic Institutional Investors (DIIs) on the other hand, had an offsetting position with increased participation and were net buyers worth Rs 16087 crores.

The FIIs ‘Long Short Ratio’ in index futures ranged from 33.18% to 73.80% in the January series. It dropped to its 19 months low levels to 33.18% as the series concluded.

Options Data:

On the options front, since it’s the beginning of the series, OI inventory is scattered at various strikes. The maximum Call OI is placed at 18000, and then at 17500 strikes while the maximum Put OI is seen at 16500 then 16000 strikes.

Options data suggests a wider trading range between 16500 to 17500 zones for February series. The Nifty closed near 17100 zones and ‘At The Money’ Straddle (February Monthly 17100 Call and 17100 Put) that is trading at net premium of around 525 points, giving a broader range of 16575 to 17625 levels.

Broader range is due to the higher volatility prevailing in the market. Considering overall derivatives activity, we are expecting the Nifty to remain volatile with stock specific action due to higher IVs.

The index needs to hold above 17180 zones, to negate its lower highs formation and to start the next leg of bounce towards 17500 and 17777 zones. On the flipside, major support persists at 17000 and 16850 zones.

BankNifty:

Bank Nifty started on a positive note and remained resilient in the latter part of the series. Despite volatility and weakness in the broader market, it sustained and showed strength.

Short covering was seen in the January series as open interest was down by 17.12% and price was up by 8.32% on an expiry-to-expiry basis.

Rollover in Bank Nifty stood at 84.26%, which is near its quarterly average of 84.27%. Rollover figures are tilted towards giving strength to the index.

Crucial support for banking index is placed at 37000 and then 36500 zone. On the flipside, immediate resistance can be seen around 38850 and 39650 zone.

Rollover Data:

On stocks front, we witnessed long rollovers in City Union Bank, Tata Power, IndusInd Bank, ICICI Bank, Aditya Birla Fashion and Retail, UPL, M&M Finance, Federal Bank, HDFC Bank, India Cement, RBL Bank, HPCL, Maruti Suzuki, Chambal Fertilisers, Canara Bank, Chola Finance etc.

While stocks like Infosys, Ramco Cements, MFSL, Havells India, PI Industries, Abbot India, LIC Housing Finance, and Wipro etc had short rollovers.

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)