Correction set to continue

F&O OUTLOOK

The markets witnessed choppy trading during the week. Bears hit back on Friday just when bulls appeared to be regaining their lost confidence. Technical analysts expect the correction to continue till the expiry of July futures contracts. The Nifty may find strong support at 4200 and the Sensex is expected to go back to its earlier support level of 13,800.

There was double bonanza in the first half of the week, with the UPA government surviving the trust vote and crude prices sliding to $124 a barrel. The monsoon bought cheer in the second half of the week. But the foreign investors turned sellers in the cash and derivatives segment on Friday, thereby spoiling the bull party.

All eyes next week would be on the RBI’s monetary policy announcement. An analyst at Prabhudas Lilladher expects the Sensex and Nifty to trade in the band of 13600-15100 and 4100-4500 respectively.

In the derivatives segment, the July series witnessed total rollovers of 19 per cent against the six-month average of 16 per cent. The rollover in Nifty August futures was lower at 24 per cent compared to the six-month average of 27 per cent. Derivatives data revealed that FIIs rolled over their short positions on July 25 (Friday). The FIIs were net sellers in index and stocks futures and net buyers in index options.

The futures segment witnessed major trading activity in the July futures of Nifty and Reliance Industries, and the Nifty August futures.

In options, there was considerable call writing in Nifty July options at the strike prices of 4300, 4400 and 4500. The open interest at these levels accounted for 37 per cent of the total call open interest. The call sellers expect the Nifty to face resistance above these levels. Of the total put OI, the Nifty 4000, 4100 and 4200 puts accounted for 38 per cent of the total put OI, indicating support against any downturn.