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| Market likely to remain in corrective mode |
| B G Shirsat / Mumbai Jan 20, 2010, 00:02 IST |
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The Sensex and Nifty closed near their trendline support of 17,400/5,220 on the back of weakness in world stocks and lack of buying interest in the futures and options (F&O) segment in the last couple days.
Index heavyweight Reliance Industries, technology, realty, auto and healthcare stocks fell. Profit-booking saw Nifty January futures close at a discount to the spot, shedding 237,900 shares in open interest. However, the February futures added 619,200 shares in open interest and closed at a premium, indicating long rollovers.
Foreign institutional investors have remained net sellers in index and stocks futures in the last couple of days and hence the market is likely to remain in the corrective mode. The derivatives data suggest the Nifty has strong resistance above 5,300 while support remains at 5,200. Technically, the bears will have the upper hand only if the Nifty closes below 5,180. The highest build-up in open interest has been in 5,300 call options, where we may see positional resistance.
The zone of 5,150-5,180 is now an important support in case the expected pullback takes place in the near future. The 5,200 call added 847,750 shares in open interest, mostly through change of hands from long holders, indicating that this crucial support level will break in the near future. The 5,200 call does not hold significant open interest and hence this support is likely to be maintained. The 5,400 and 5,500 calls saw profit-booking as participants expected the Nifty to stay around 5,200-5,300.
India Volatility Index, a measure of the market’s expectation of volatility over the near term, increased 3.67 per cent, indicating the amount by which the underlying index is expected to fluctuate in the near term. Put option traders, witnessing the rise in India VIX, covered their short positions at 5,200 and 5,300 strike puts on expectation of a fresh correction. However, 5,100-5,200 puts hold the highest open interest among all puts. So, the Nifty has strong support at these levels.
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