SGX Nifty Gains 110 Pts as ‘Range Trading’ Continues!

The benchmark Nifty 50 index tumbled hard on Friday, closing the session 0.77% lower at 16,945.05 which was its third consecutive session with a red closing. The spoiler in the bulls' party was yet another bank that is now spooking the global markets - Deutsche Bank (ETR: DBKGn ). It is the largest bank in Germany, and after Credit Suisse (SIX: CSGN ), its CDS (credit default swaps) saw a mindboggling rally to the highest level since 2018 as investors gauge its failure now.

Before Credit Suisse was taken over by UBS Group AG (SIX: UBSG ), its CDS were soaring to sky-high levels, and now the same scenario is panning out with Deutsche Bank. CDS can simply be understood as the cost of insurance against default on debt, which if rises, indicates a higher probability of default.

However, the US markets ended in the green territory on Friday, with Dow Jones jumping 0.41% to 32,237.53 while S&P 500 witnessed an uptick of 0.56% to 3,970.99. The ripple effect has been seen on the SGX Nifty which soared by 118 points to 17,037.5, almost paring all of Friday’s 131.85-point loss. This is a range-bound market, as mentioned in the earlier analysis (link at the bottom) as investors do not seem to be holding back on buying the dips and rallies are anyway getting sold off during this uncertain macro environment, pertaining to the banking crisis.

Despite the market going nowhere, the bias is still a bit skewed toward the downside. The options chain data is clearly showing higher options writing on the CE side, as compared to the PE side. The highest open interest (OI) is present at 18,000 CE which is not surprising as generally, strikes with a denomination of 1,000 attracts a high OI for monthly expiry. After that, 17,500 holds an OI of 1.79 lakh contracts, making it a good resistance for the current March 2023 monthly expiry. However, on the charts, the likelihood of 17,200 can easily be seen, as of now.

On the lower side, 17,000 PE (which is ITM) has the highest OI of 1.33 lakh contracts, but again as it is a monthly expiry, it is no big deal. But this also shows traders' confidence in Nifty 50 not closing below this level by coming Thursday. Still, there is a possibility of 16,825 - 16,850 to be tested again.

In conclusion, the range for the upcoming monthly expiry is 16,825 - 16,850 on the lower side and 17,200 -17,252 on the upside. If the resistance gets breached, then we might see another 300-point rally to 17,500, which the options data is discounting.

Read More: Nifty 50 Forming a Narrow Range; Keep these Levels on Radar!