Caution ahead of contract expiry

F&O OUTLOOK

The Nifty July futures traded in a narrow band of 50 points throughout the trading session as players went short at higher levels and covered at lower levels.

The intra-day trading data sourced from Bloomberg indicates that almost 50 per cent trading in Nifty futures took place at an average price of 4430, with buy bids outnumbering the sell bids.

The July futures added open interest (OI) of 4.2 million shares during intra-day trading. But the OI declined by 1.33 million shares during close-out session, indicating profit-booking by the day traders. The F&O players were not willing to rollover their contracts as the Nifty August futures added OI of a mere 1.12 million shares.

Most traded stock futures including ICICI Bank, State Bank, Reliance Communication, Tata Power and Tata Steel, reported profit-booking at higher levels. The rollovers in many of these contracts remained weak as speculators chose caution ahead of the derivatives expiry.

There was call writing (selling of call options) not only in out-of-the-money calls (strike price higher than the spot value) at 4500 and 4600 strike prices, but also in case of at-the-money calls (strike price around the spot value) at the strike price of 4400.

Put buying took place at 4200, 4300 and 4400 strike prices. The derivatives players expect the Nifty to settle between 4300 and 4400, with a low of 4250, in the current month series.