Expect weakness below 3800

F&O OUTLOOK

The Nifty has bounced back after breaching the previous low of 3790 and closed the session at 3850 with a loss of 135 points. This is the third time in the last three months that the index has received support at 3800, indicating this to be a tentative support level.

Nevertheless, the F&O players were comfortable buying Nifty futures at lower levels and booking profit at higher levels. Bloomberg data show that almost 60 per cent trades (probably short covering) in the Nifty October futures were done around 3836 while 25 per cent trades were done around 3940.

The momentum indicators are trading in the oversold zone. But the macro and global cues have got an upper hand negating technical indicators, says Ashish Shroff, a technical analyst at Ambit Capital.

He expects market to remain weak in the short and medium term with reversal point coming only above 4200.

Front-line technology stocks were down by 4-9 per cent on account of building up of fresh shorts in Infosys, Satyam and TCS. ICICI Bank too witnessed short selling as its October contract declined by 12 per cent while open interest increase by 2.08 million shares.

The Nifty October futures were trading at a premium of around 17-20 points to the spot price in the beginning of the session, but contracted to around 5-8 points towards the end of the session. The Nifty futures closed with a premium of nine points with open interest increased by 1.94 million shares.