F&O Outlook: Nifty may fall below 2,550

The Nifty opened on a positive note on strong global cues and closed above 2,600 at 2,617, up 44 points. Trading in the F&O segment, however, indicated that traders were booking profit at higher levels and hence the market may see further correction in Nifty in tomorrow’s session.
 
The Nifty March futures managed to close just around 2,600 but shed an open interest (OI) of 1.14 million shares, indicating profit-booking at higher levels.

But the April futures closed at a discount to the March futures and added an OI of 657,050 shares, indicating build-up of short positions.

Call option traders were seen booking profits at 2,400-2,600 strike calls as they expected the Nifty to trade below 2,550 levels. The traders, therefore, unwound their short positions at 2,500 and 2,600 strike puts, indicating that the index might lose the support of 2,500 in the near future.

Higher level selloffs were also seen because of the decline in OI in several stock futures such as Hindustan Lever, Hindalco, ICICI Bank, Infosys Technologies, Larsen & Toubro and State Bank of India. The OI in these stock futures has declined between 200,000 and 700,000 shares, largely on account of profit-booking at higher levels.

Bharti Airtel was the biggest loser among index stocks, down 6.7 per cent on heavy profit-booking after the telecom regulator announced a cut in a key expense item for network operators, pressuring firms to lower call tariffs.

The March futures of Bharti Airtel traded at a discount to the spot throughout the day and added an OI of 927,500 shares, indicating creation of short positions.

As against the close of Rs 548.60, Bharti’s Rs 560 strike call changed hands at a premium of Rs 15.65 per share, indicating that the stock has very limited upside and may see further correction in the near future.

ICICI Bank was up 8.87 per cent on heavy short-covering in its March futures, which closed at a premium to the spot and shed an OI of 566,300 shares, indicating covering of short positions.