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| Nifty may see a gap-down opening |
| B G Shirsat / Mumbai Oct 04, 2009, 00:53 IST |
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The Nifty moved in a narrow range of 5,040-5,090 on Thursday and closed in a Doji pattern, which points to a lack of direction for the market. Domestic markets were closed on Friday on the occasion of Gandhi Jayanti. In the backdrop of the US and European stocks witnessing an over two per cent correction in the last two days, the Nifty is likely to open gap down on Monday.
The October futures of SGX Nifty closed at 4,940 on Friday on the Singapore Exchange compared to a close of 5,070 on Thursday. This also suggests a gap-down opening on Monday.
According to a technical analyst of Sharekhan Research, the index has been trading in an upward parallel channel with upper end at 5,150 and lower end at 4,900. It is now important for the index to surpass the 5,150 level to gain momentum. On the daily chart, the index is trading above the 20-day daily moving average (DMA) of 4,880 and the 40-day DMA of 4,719, which are crucial support levels going forward. The 5-day Relative Strength Index (RSI) is above 80, indicating that the market is at overbought level.
Trading by foreign institutional investors (FIIs) in the derivatives segment suggests that they are booking profit in the Nifty futures and building long positions in stocks futures. No wonder, the open interest for FIIs in index futures came down to 490,318 contracts on September 25 and 442,713 contracts on October 1, mostly through sell-side trading. This trend indicates profit-booking at higher levels. In stocks futures, FIIs’ position has gone up by 20,070 contracts during the three trading days, mostly through buy-side trading. It indicates a long build-up in stocks futures.
The Nifty October futures has been trading at a discount to the spot and added only 43,400 shares in the open interest during the week. This means that bears have been active and building short positions in the Nifty futures on expectation of the 100-150 points correction in the coming week.
Traders were seen booking profit in 4,900-5,000 strike calls and building fresh short positions in 5,100-5,200 strikes calls on expectation of a modest correction going forward. The 4,900 put which added 1.48 million shares in the open interest in the last three trading days suggests that the Nifty has strong support around the 4,900 level.
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