3,800-level all set to give way

F&O OUTLOOK

The Sensex closed at its 52-week low while the S&P CNX Nifty escaped narrowly,closing just two points above its 52-week low. This is a bad signal for the market and most of the support levels are likely to be breached on Monday on weak global cues. Trading in Nifty options suggests it would lose its support of 3,800 soon. The new support levels for the index is seen at 3,700 and 3,650.

RIL on Friday opened weak and declined through the day on delivery-based selling and fresh shorts build-up in the F&O segment. The stock closed at a low of 1745.65 with delivery volume accounting for 40-50 per cent of the total trade on the BSE and NSE. The Reliance October futures declined by 7.6 per cent on a 25 per cent intra-day increase in open interest.

The Nifty October futures witnessed short selling above 3900 while a good deal of short covering was seen below the 3850 levels. Bloomberg data show that over 40 per cent of trades were struck at an average of 3848, indicating that traders were more comfortable to buy below the 3850 level. The Nifty October futures closed with a premium of 33 to the spot Nifty.

The 3,800 put, which was witnessing good selling from the beginning of October contract expiry, showed some amount of profit booking on Friday. Open interest at 3,800 put declined by around 3 per cent indicating the index may not hold this support level going forward. However, 3700 and 3650 strike puts witnessed significant amount of selling.

The 3700 put has open interest of 2.06 million shares while the 3700 strike call has open interest of 60,850 shares indicating 3700 may be the next support level.