Build-up in short positions

F&O OUTLOOK

The markets opened weak on the back of weak global cues, but pared some of their losses as the session progressed. Selling pressure, however, resumed late afternoon. The Sensex finally closed at 13,330 (down 140 points) and the Nifty ended at 4,040 (down 9 points).

The stock futures of Infosys Technologies and Satyam Computer Services fell by seven per cent each on concerns of a further slowdown in US' technology spending. Both Infosys and Satyam added open interest of around 8,00,000 shares each and the prices of July futures contracts declined by over seven per cent each, indicating fresh short build-up.

The stock futures of Ranbaxy Laboratories tumbled 10.25 per cent on concerns surrounding a US probe against the company. Ranbaxy futures added open interest of 2.79 million shares, mainly short positions, on fears that the probe may hit the company's revenues.

Technically, the Nifty's failure to sustain above 4100 points to weakness at higher levels. Analysts expect the Sensex and Nifty to test 12,500 and 3650 respectively in a couple of weeks.

The support at 4000 may fizzle out, going by the trading activity in options. The Nifty 4000 put witnessed unwinding of positions, as the open interest declined by 62,500 shares despite trading volumes of 5.19 million shares. Put writers squared off their positions on expectations that Nifty may slip below 4000.