After recovering nearly 7.5% between the March and April derivatives series amid the Iran war, options traders on Wednesday baked in a 758-point range for Nifty over 24,200, per exchange data.
The Nifty closed the session on Wednesday up 0.76% at 24,177.65, a day after the April series of derivatives expiry.
Traders now expect the Nifty to trade in a 23,821-24,579 range until next Tuesday, based on the volume weighted average price per share (65 shares make one contract) of the 24,200 call and put options expiring on 5 May.
"The price of the 24,200 straddle (call and put) indicates a rangebound market after the smart rally from the March to April derivatives expiry," said Kruti Shah, quant analyst at Equirus.
Shah expects upside pressure to set in around 24,600, which coincides with the market high of 21 April—24,601.7—after which the index corrected 1.7% to Wednesday's close of 24,177.65.
A Nifty derivatives series expires on the last Tuesday of every month. During the course of an expiry month, the NSE offers a weekly index options expiry every Tuesday. If Tuesday happens to be a holiday, the Nifty expires on the previous trading day.
The market closed the March series at 22,331.4 and the April series (Tuesday) at 23,995.7 — a gain of 7.45%.
Oil watch
Any further upside will depend on how energy prices move after Iran on Monday proposed an end to the war and the UAE broke away from oil cartel OPEC a day later, per market veterans.
"The single-most important variable for markets will be oil, as that would reflect the collective wisdom of all the newsflows related to the fallout from the conflict," said Nilesh Shah, MD of Kotak Mahindra AMC.
Shah added that "counter-investing" could be a strategy in the absence of a momentum-based market until clarity emerges on the conflict's resolution.
Counter-investing refers to buying the dip and selling the rally.
Volatile swings
The market made a 52-week high of 26,373.2 on 5 January before tanking 16% to a 52-week low of 22,182.55 on 2 April. From that low, the market has risen 9% through Wednesday's close.
The fall from the 52-week high accelerated after the war, which began at February-end, drove oil up 44% to $104.40 a barrel on 28 April. Though both sides agreed to a ceasefire since 7 April — which has been extended indefinitely — the lack of progress on a final resolution has kept investors cautious.
"We could trade in a range of 23,800-24,600 over the next two weeks," said Rajesh Palviya, derivatives and technical head at Axis Securities.
However, Nirmal Jain, founder of IIFL Group, remains optimistic.
"The belligerents don't want to fight, as reflected by the ceasefire extension, which is good news. So, my belief is that any dips should be purchased, given that India remains the world's fastest-growing economy," Jain said.
Foreign portfolio investors have been the biggest sellers since the start of the year, offloading ₹2.02 trillion in the cash market in the calendar year through Tuesday, per depository data.
Over the same period, domestic institutional investors have net bought equities worth ₹2.96 trillion, cushioning the fall, according to data from the BSE.