F&O Outlook: Nifty may not hold 5,000 levels

The Nifty failed to remain above the 80 per cent retracement level of 5,060 and closed in a Doji pattern, which indicates indecisiveness among traders. There was profit-booking in the Nifty November futures as well as in money index options as index futures and options together shed over four million shares in open interest through sell-side trades. The support is seen at 4,940, which is 61.8 per cent retracement level. The resistance continues to be around 5,060.

Technically, the market is significantly overbought, which is why traders resorted to profit-booking in index futures, index options and stocks futures. The Nifty November futures closed on a par with the spot and shed 1.90 million shares in open interest, indicating profit-booking. Bloomberg data show traders unwound long positions at every upside, which was indicated by more sell-side trades all through the day.

Options traders booked profit in all calls at 4,900 strikes and below as they expected the index could move below the support level of 4,940 in the near future. Bloomberg data suggest that 5,000 and 5,100 calls saw change of hands as both buy-side and sell-side volumes were at 47 per cent. However, intra-day trading suggests profit-booking in these calls during the morning session as the sell-side volume was higher at 51 per cent than the buy-side volume of 43 per cent.

Put options traders booked profit in 4,500-4,700 strike puts and covered short positions in 4,800-4,900 strike puts. The 5,000 put saw change of hands from sellers to buyers while the 5,100 put added 240,005 shares in open interest, mostly through buy-side trades. This means the index may not hold 5,000 levels in the near future and may slide below the 4,900 mark.