2024 Elections and Beyond: The Bullish Case for Market

As the stock market world grapples with the aftermath of Nifty 50 reaching an all-time high of 20223 in September, the subsequent correction has set the stage for intriguing market dynamics. Witnessing a substantial profit booking frenzy, Nifty retraced to retest a crucial support level at 18800 during the October correction.

From my perspective, this correction wasn't a cause for concern but rather a robust and much-needed adjustment for the market's overall health. Savvy investors seized the opportunity to capitalize on this correction, strategically positioning themselves for potential gains.

November unveiled a positive twist, with Nifty bouncing back to achieve a positive all-time high monthly closing around 20133. The prevailing sentiment in the market reflects an optimistic outlook, providing a glimpse into the resilience of the market landscape.

As the countdown to the Lok Sabha election in 2024 begins, speculations and predictions are rampant among experts. Many anticipate that the market will hit the coveted 21000 mark before the elections unfold.

While some share this sentiment, I hold a distinctive viewpoint. I don't believe the market will reach 21000 before the election; instead, I am steadfast in my conviction that it will not only breach this level but also scale beyond, potentially testing the waters at 23000 in the near future.

What fuels my confidence in this bullish market trend? In the upcoming sections, I will delve into key data points that paint a compelling picture of a significant upswing for Indian share markets, propelling them into the promising blue sky zones. 

Join me on this insightful journey as we analyze the intricate interplay between market dynamics and the impending Lok Sabha election's impact on the share market.

Decoding Option Chain Insights

In the intricate world of stock market, decoding the signals from option chain data can offer invaluable insights into the market's trajectory.

Call Writers' Mind Set

Upon closer examination of the Nifty option chain, one can discern a strategic trend among call writers. Notably, positions are being established around key strike points, including 20300, 20400, and prominently, 21000.

The 21000 strike stands out, boasting the highest Open Interest at 1,16,063 contract lots, followed by 20300 with approximately 85,000 open interest and 20400 securing the second-highest position at 1,04,553.

The Nifty's last day closing at 20267 adds a compelling layer to this analysis. It suggests that option chain participants are expressing confidence in the potential attainment of the 21000 level in the near future, substantiated by their strategic positioning.

While some may attribute these moves to the imminent assembly election results this Sunday, it's crucial to consider the prevailing political landscape. The BJP has clinched victories in three significant states, ushering in a wave of positivity for the market.

Consequently, the prevailing sentiment aligns with the call writers' psychology, reinforcing the belief that the 21000 mark is not just a speculative possibility but a likely scenario on the horizon.

Put Writers' Mind Set

A closer examination of the Nifty Option Chain, considering the viewpoints of Put writers, sheds light on the significance of key levels such as 20000, 20100, and 20200. These strikes hold substantial importance for Put option writers, evident in the respective open interests of 1,33,838, 93,211, and 93,094.

This robust positioning by Put writers reflects a notable confidence in these levels. While call writers are strategically establishing positions at 21000, the counterparts on the Put side have taken substantial positions at the 20000 strike.

This decision is particularly bold given the Nifty's closing around 20267 and the heightened volatility due to election results. However, this bold move underscores a great confidence, suggesting that 20000 is poised to serve as a significant support level for the Nifty in the near future.

Examining the closing positions of call writers, it becomes apparent that they have already factored in the upcoming assembly elections. This dual perspective from call and put writers provides a comprehensive view of market sentiments, offering valuable insights into the potential trajectories influenced by the current political landscape.

PCR and Max Pain

The Nifty PCR is currently at 1.19, indicating a comfortable zone and signaling potential buying activity in the market. This suggests an impending surge that may lead to profit booking at higher levels. It's advisable for traders to be prepared for this anticipated market movement.

Additionally, the Max Pain level is identified at 20200, making it a crucial point for Nifty. As a trader, it is essential to be mindful of this level, as it holds significance in market dynamics.

Staying aware of both the Nifty PCR and the Max Pain level provides valuable insights, enabling traders to make informed decisions and navigate the market volatility with a strategic approach.

OI Build UPs for Nifty

Observing the Open Interest (OI) Build Ups in Nifty provides valuable insights into the current market trend. As per the OI data, Call writers find themselves ensnared around the 20000, 20100, and 20200 strikes, prompting them to hurriedly cover their short positions in a state of panic.

Notably, this isn't a mere unwinding of shorts; smart money is also initiating call buying positions across multiple strikes, with a notable focus on the 21500 strike. It's evident that 21500 is a key consideration for them.

Image Credit : Opstra

Furthermore, the OI Build Ups signal heightened confidence levels among Put writers. Astonishingly, they have written various in-the-money put strikes, stretching up to 21000 despite the Nifty's closing at 20267.

This level of conviction is remarkable and adds an intriguing dynamic to the market, showcasing a bold and, some might say, unconventional strategy by Put writers and smart money.

The Current Trend Analysis

Put writers are exhibiting strong confidence by writing options not only at the 20000 strike but also at deep in-the-money levels. Conversely, call writers appear to be in a predicament, leading smart money to initiate buy positions in call options, including out-of-the-money calls.

This scenario indicates a positive bias for Nifty and the overall market. Additionally, the Put-Call Ratio (PCR) suggests the potential for more buying activity. Considering the comprehensive analysis of the option chain and open interest data, there are indications that Nifty could surpass the 21500 mark in the near future.

Where is 2300 on Nifty?

Hold on, you might be wondering about my earlier statement regarding Nifty potentially reaching 23000 before the Lok Sabha elections. However, the current option chain data is pointing towards 21500. Wondering where the 23000 went?

Fear not, my friend. Let's conduct a chart check to delve deeper into the current market dynamics.

As you're aware, Nifty currently finds itself in the blue sky zone. To identify potential new levels, let's apply Fibonacci retracement levels.

Notably, there was a breakout around 18800, which has already been retested on the monthly charts. Furthermore, Nifty has achieved closing levels both weekly and monthly above a significant Fibonacci level of 161.8%.

Looking ahead, the next potential levels could be at 261.8% and 361.8%, approximately around 21500 and 23000. While it might take some time to reach these levels, the indication is that they are on the cards before the upcoming elections.

Disclaimer: The information provided in this blog post is for informational purposes only and should not be considered as financial advice. The author is not a financial advisor, and readers are encouraged to conduct their own research and consult with a qualified professional before making any investment decisions.