Bounce back expected; Strong resistance placed at 5300-5350 levels ::Emkay

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Bounce back expected; Strong resistance placed at 5300-5350 levels

The massive sell-off seen across global indices forced the volatility indices to surge to 52-week high levels. The first sign of a decline in the volatility index was observed yesterday with US VIX declining to 35.06% from a high of 48%. NSE VIX has increased to 34.88% from a low of 18.51% observed in the current series. We expect a similar kind of move in the NSE VIX, aiding a bounce back in the index.

Nifty put call ratio of open interest increased to 1.02 levels after registering a low of 0.93 levels in the penultimate session. Since January, 2011, the ratio has been moving in a range of 0.87 levels to 1.35 levels. The ratio has a direct correlation with the index suggesting any further increase in ratio will indicate an up move in the index.

Nifty August futures open interest remained flat at 23.69 million shares. Among options, maximum open interest continues to remain concentrated at 5000 put strike (6.75 million shares) and 5500 call strike (8.22 million shares). Average implied volatilities for ATM strike surged to 35.63% from 29.56%. 

Most of the F&O indicators are indicating a bounce back in the Nifty. Strong resistance for the index is placed at around the 5300-5350 levels. We believe stock specific movement to prevail in the near term. Banking sector is likely to continue to outperform the index. We expect Canara Bank, HDFC Bank and SBI to outperform its peers.