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| Nifty likely to fall below 4,910 |
| BG Shirsat / Mumbai Sep 30, 2009, 00:22 IST |
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The Nifty futures closed in a Doji pattern after a gap-up opening. This indicates that futures and options (F&O) traders are wary of taking positions on either side. Trading in the Nifty options on Tuesday suggested that the index might fall below 4,910 in the near future.
However, the market sentiment was boosted by a 1.3 per cent gain in Dow Jones Industrial on Monday and the domestic economic data showing a surge in the core sector growth. Information Technology (IT), banking and healthcare stocks moved up on Tuesday. But the Nifty October futures failed to close above 5,010, though it made an intraday high of 5,019.70. It was necessary for the Nifty futures to close above 5,010 for an upward breakout.
The October futures witnessed profit-booking above 5,000, according to the Bloomberg data, which suggested that almost 55 per cent of the total trading volume changed hands through sell-side trade. At close, the October futures shed 211,300 shares in open interest (OI) despite an intraday build-up of 1.70 million shares.
Options traders were on Tuesday seen buying 4,800-5,000 strike puts and writing 5,000-5,300 strike calls. According to Siddhartha Bhamre, head of derivatives at Angel Broking, the traders bought puts probably to hedge their long positions as they expected volatility to increase in the near future. Since volatility in call options has increased from around 24 to 28/30, the players expected the Nifty to move down by 100-150 points from its current level and hence they sold off call options.
The 5,000-5,300 strike calls together added an OI of 2.11 million shares mostly through sell-side trade, indicating that the traders had built up short positions in these options. Interestingly, the OI in the 5,000-5,300 strike calls stood at 3.50 million shares, indicating a strong zone for the Nifty in the near future. The 4,900 put on Tuesday added 263,650 shares in OI, mostly through buy-side trade, which indicated hedging of long positions.
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