F&O Outlook: Market set to find support at 3,100

The Nifty opened on a positive note, faced resistance at 3,150 and received support at 3,060.

However, despite a V-shape recovery in the last hour of trade, the Nifty closed with modest losses. Technical analyst Ashish Shroff of Ambit Capital expects that the Nifty could now test 3,000 in the near future as momentum indicators have turned into sell mode.

The recovery in the market was, to some extent, aided by Reliance Industries (RIL) and ICICI Bank, which closed in the green after testing lower levels. Bhel, HDFC Bank, Steel Authority of India (SAIL) and Satyam Computer supported the rise, while Bharti Airtel, DLF and Reliance Communications closed in the red on profit-booking.

Nifty January futures were trading in a range of 3-4 points premium to 2-3 points discount for the major part of the session, but closed almost on a par with spot. The Nifty January futures witnessed profit-booking at higher levels with almost 40 per cent of trades taking place at an average of 3,125. The Nifty also shed open interest of 279,450 shares during the settlement trade, indicating unwinding of long positions.

The 3,100 strike call options witnessed profit-booking and some unwinding from short-sellers. The 3,200 call generated a trading volume of 6.16 million shares and the open interest rose marginally by 89,150 shares, indicating that futures and options (F&O) players were not sure about the Nifty achieving 3,200 levels. The 3,100 put, however, added an open interest of 580,350 shares, indicating that the Nifty may maintain this support.

As expected, ICICI Bank closed above Rs 500 at Rs 522 on fresh long build-ups. The stock was up 4.6 per cent, while its January futures added an open interest of 844,200 shares, indicating long build-ups. The 530 strike calls of ICICI Bank added an open interest of 112,525 at an average premium of Rs 35 a share, indicating that the stock can move up to the Rs 565-level.

RIL moved on expected lines and touched an intraday high of Rs 1,387 and received support at Rs 1,330. Traders were seen buying 1,410 calls and writing 1,350 puts, indicating that the stock can rise up to Rs 1,410 with a lower-level support of 1,350.