How to Calculate Nifty Target for Any Expiry?

Introduction:

Welcome to the world of stock trading! If you are new to the Indian stock market, you may have heard about Nifty. It is the stock market index of the National Stock Exchange (NSE). Calculating the target of Nifty for the next expiry is essential for traders and investors to make informed trading decisions. In this blog post, we will discuss the easiest method of calculating the Nifty target for the next expiry. We will also cover the tools and techniques that can help traders and investors determine the Nifty expiry range. We will also answer some frequently asked questions related to Nifty targets, expiry, and prediction.

What is Nifty and how is it calculated?

Nifty is a stock market index that represents the performance of the top 50 companies listed on the National Stock Exchange (NSE). It is calculated using the free-float market capitalization-weighted method. In simple terms, it is a benchmark index that reflects the overall market sentiment. It also helps traders and investors in making informed trading decisions.

To calculate the Nifty index, the total market capitalization of the 50 companies is multiplied by the free-float factor (the proportion of shares available for trading in the market) and divided by the base year market capitalization. The base year for Nifty is 1995 and the base value is set at 1000 points.

How to Find Nifty Expiry Target Range:

There are two main methods to determine the Nifty expiry range: using Open Interest Graphs and using Monthly Pivot Points.

A. Using Open Interest Graphs:

Open Interest (OI) is the total number of outstanding contracts in the market that are not closed or delivered on a particular day. Open Interest Graphs provide valuable insights into the market sentiment and help traders in predicting the expiry range of Nifty.

To calculate the Nifty expiry range using Open Interest Graphs, follow these steps:

  • Plot the Open Interest Graph for the Nifty Futures contract.
  • Identify the maximum OI for Calls and Puts.
  • The strike price with the highest OI for calls represents the resistance level. Similarly, the strike price with the highest OI for puts represents the support level.
  • The difference between the strike price with the highest OI for calls and the strike price with the highest OI for puts represents the Nifty expiry range.
  • Let’s take an example to illustrate the process:
Calculating Nifty Target from Open Interest

Suppose the highest OI for Calls is at an 18,000 strike price and the highest OI for Puts is at a 17,800 strike price. The Nifty expiry range would be (18,000-17,800) = 200 points.

B. Using Weekly or Monthly Pivot Points:

Pivot Points are a popular tool used by traders to determine important support and resistance levels in the market. Weekly or monthly Pivot Points are calculated based on the previous week’s or month’s data. This can help traders determine the Nifty expiry range for the next week or month.

To calculate the Nifty expiry range using Weekly or Monthly Pivot Points, follow these steps:

  • Calculate the pivot point by adding the high, low, and close of the previous period and dividing the sum by three.
  • Calculate the first support level (Weekly or Monthly S1) by multiplying the pivot point by 2 and subtracting the high of the previous period.
  • Calculate the first resistance level (Weekly or Monthly R1) by multiplying the pivot point by 2 and subtracting the low of the previous period.
  • The difference between the S1 and the R1 represents the Nifty expiry range of that week or month.

Let’s take an example of Monthly Pivot Points to illustrate the process:

Suppose the high, low, and close of the previous month were 15,000, 14,500, and 14,800 respectively. The pivot point would be (15,000+14,500+14,800)/3 = 14,767 points. The Monthly S1 would be (14,7672)-15,000 = 13,534 points, and the Monthly R1 would be (14,7672)-14,500 = 15,034 points. The Nifty expiry range would be (15,034-13,534) = 1500 points.

Now, let us take an example of Weekly Pivot Points:

Calculating Nifty Expiry using Pivot Points

Check in the image above, how Nifty has taken support exactly on the weekly Pivot S1.

Which method is better?

Both methods have their own advantages and disadvantages. Open Interest Graphs provide real-time data and can give traders an idea of the current market sentiment. But, they may not always be accurate as they are based on the current outstanding contracts. Pivot Points, on the other hand, are calculated based on the previous week’s or month’s data and can provide a more reliable prediction of the market range. But, they do not take into account the current market sentiment.

Therefore, it is recommended that traders and investors use both methods to get a more accurate prediction of the Nifty expiry range.

Frequently Asked Questions on Nifty Expiry Target:

Can Nifty be predicted accurately?

No, Nifty cannot be predicted accurately as it is influenced by various factors such as global market trends, economic indicators, political events, and company-specific news. However, by using technical and fundamental analysis, traders and investors can make informed trading decisions,

What is the significance of Nifty expiry?

Nifty expiry is the date when the current month’s Futures and Options contracts expire. It is an important event as it determines the settlement price of the contracts and affects the overall market sentiment.

What is the impact of Nifty expiry on the stock market?

Nifty expiry can lead to increased volatility in the stock market as traders and investors adjust their positions to the new expiry month. It can also lead to price fluctuations and changes in the overall market sentiment.

Conclusion:

In conclusion, calculating the Nifty target for the next expiry is an essential task for traders and investors in the Indian stock market. By using Open Interest Graphs and Monthly Pivot Points, traders can determine the Nifty expiry range and make informed trading decisions. Both methods have their own advantages and disadvantages. Using both can provide a more accurate prediction of the market range. It is important to remember that we can not always predict Nifty accurately. Hence, traders should use technical and fundamental analysis to make informed decisions.

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Author: Indrajit Mukherjee

Indrajit is a professional blogger and trading system developer. Amibroker expert, Wordpress expert, SEO expert and stock market analyst.Trading since 2002, he has started the journey of StockManiacs.net on 2008. He follows Indian and world stock markets closely.

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