Nifty, Bank Nifty may see limited downside, believe analysts; here's why

Solar Industries, NCC, Phoenix Mills, Page Industries and Trent stock futures witnessed short build-up in recent days, shows NSE derivative data. Manappuram Finance in F&O ban on Monday.

Despite the back-to-back losses in the last three trading sessions, the Nifty managed to end last week with a gain of 0.3 per cent; thanks to the sharp mid-week rally. The Nifty spot ended at 23,560, while the near-month February futures settled at 23,615 - at a premium of 55 points. Last week, open interest (OI) in Nifty February futures declined by 3.7 per cent.  The underlying short-term trend of Nifty is weak with high volatility. The market is now placed at the support of 23,500 - 23,400 levels and a sustainable upside bounce from the support could pull Nifty towards 23,800 levels again in the near term, believes Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities.  However, any breakdown of the support could negate the bullish bet and likely to bring sharp weakness, says Nagaraj Shetti in a note.  Meanwhile, the Bank Nifty futures rallied 1.3 per cent last week to 50,355, amid a 22.2 per cent dip in OI. The futures contract quoted at near about 200 points premium compared to the spot Bank Nifty.  Technically, immediate support for the Bank Nifty is near 49,650, while on the upside, 50,600 will function as resistance, says Hrishikesh Yedve, AVP Technical and Derivatives Research at Asit C. Mehta Investment Interrmediates.    Traders should closely monitor these levels for potential opportunities. However, looking at weekly formation, buy on dips strategy should be adopted in Bank Nifty, says Hrishikesh Yedve in a note.  Nifty, Bank Nifty options analysis  The Nifty options data indicates a moderately bearish undertone, as call writers maintain an edge over put writers, signalling a gradual shift toward seller dominance, explains Dhupesh Dhameja, Derivatives Analyst at  SAMCO Securities.  The 24,000-call strike saw an aggressive spike in open interest (84.81 lakh contracts), reaffirming it as a formidable resistance level. On the flip side, significant put writing at the 23,000 strike (41.82 lakh contracts) underscores strong downside support. Fresh call additions across 23,600 – 24,000 further reinforce resistance, while put unwinding at lower strikes hints at bearish realignment.  Meanwhile, the Put-Call Ratio (PCR) declined to 0.67 from 0.85, reflecting a gradual shift towards bearish sentiment. The 'Max Pain' level at 23,600 indicates muted downside risk despite volatile swings, said Dhupesh Dhameja in a note.    In case of the Bank Nifty, options data indicated renewed selling pressure at higher levels. The 52,000-call strike witnessed a sharp surge in open interest, while notable put writing was seen at the 49,000 strike.  Additional build-up of call options from 50,500 to 51,000 strengthens resistance, whereas put unwinding at lower strikes hints at a potential bearish readjustment. The PCR remains unchanged at 0.85, indicating a bearish undertone, while the 'max pain' level stands at 50,400; suggests limited downside risk, the note stated.  FIIs, DIIs, Retail - Trading bets in F&O  Foreign institutional investors continue to hold bearish bets, with long-short ratio in index futures at 0.19 - implying more than 5 short positions in index futures versus every bullish bet.  On the other hand, retail investors remain the most bullish lot, with a long-short ratio at 2.59 - implying nearly about 3 long positions for every short trade. Domestic Institutional Investors (DIIs) and proprietary traders also hold more longs in index futures compared to short positions.    Stocks in F&O  Data from the NSE futures & options segment show that Torrent Power has seen consistent build-up of long positions in recent days. The stock futures contract has gained more than 5 per cent alongside a 144 per cent surge in OI. Similarly, some buying activity was visible in Kalyan Jewellers and Zydus Life.  On the flip side, Solar Industries saw a 4.3 per cent dip in the last four trading sessions, alongside over 309 per cent surge in OI - thus implying possible short build-up at the counter. NCC, Phoenix Mills, Page Industries and Trent also saw a similarly trading bias.  Meanwhile, Manappuram Finance was the only stock placed under F&O ban on Monday.