After opening on a positive note, Indian bourses quickly moved into the red and remained range-bound till afternoon. Just when it seemed that there was no direction in the market, indices fell further on the back of heavy selling in the last hour of trade.
The trading pattern in the futures and options (F&O) segment suggested that some stability might come into tomorrow’s trade. The Nifty March futures closed at a discount and added an open interest (OI) of 1.75 million shares, indicating short build-up. However, the increased OI was a modest 4.4 per cent of the total trading volume in the March futures. This indicated short-covering during the intraday trade.
Though the 2,600 put options witnessed a trading volume of 10.48 million shares, OI was up by 270,600 shares, indicating that some shorts have been covered at high premium. This means the Nifty may trade above 2,600 for some time before falling to 2,500 levels.
The 2,500 strike put has a huge OI build-up of 8.82 million shares, indicating that institutional traders expect the Nifty to get strong support at around 2,500.
Technical studies indicate that the Nifty may trade at around 2,500 in the near term and any case of a bounce-back, the index would face resistance between 2,670 and 2,700. Technically, further weakness is expected, which may take the Nifty to 2,500-2,550 and from where a rebound is possible.
The options traders indicated a bounce-back in the Nifty as they covered their shorts in 2,700 and 2,800 put options. The traders have covered 1.24 million shares in 2,700 put options and 197,900 shares in 2,800 put options, indicating some relief rally in the near future. Interestingly, the 2,600 strike call of April futures added an OI of 502,800 shares, mostly through block deals, indicating that the market might witness a bounce-back in April.
Siddhartha Bhamre, equity and derivative analyst at Angel Broking, expected the Nifty to trade around 2,500 in the near future. He also hoped for a marginal rebound in the market. Investors were selling 2,200 put options on the expectation that the Nifty would not go below 2,500.
Three weeks of range trading have led to low premiums and expectations that the market will not move much on settlement day.