F&O Outlook: Nifty range-bound in the near future

Despite volatility in the markets, the spot Nifty was able to hold on to 2,860 and closed the day above the 2,900-level at 2,920. The 2,860-mark was the stop-loss for long positions and, hence on technical charts, the markets will make another attempt to test the upper end of channel trend-lines, which are at the 2,980-level. If the index reverts from this levels, there is then a possibility of it moving down.

The Nifty managed to erase most of its losses on buying in heavyweights and ended the day with a loss of 9 points. Nifty December futures maintained their premium to the spot index, but did not added any open interest (OI), indicating that F&O players are wary of taking long as well as short positions.

However, long rollovers of 584,000 shares were seen in Nifty January futures at a premium of 6 points over December Nifty futures, indicating that traders expect the current pullback to continue in the new year. However, though the positive momentum might continue for some more trading sessions, the market may be range-bound in the near future.

Trading volumes in the F&O segment was lower by 4.56 million shares in index futures and 18.3 million shares in index options as traders were wary of taking positions at higher levels. Profit-booking was seen in as many as 105 stock futures, while the OI in 35 stocks futures rose by 100,000-800,000 shares each.

Options traders were seen buying 2,900-3,100 strike calls and unwinding short positions at the 3,200 call. This indicates that options traders have taken a view that the Nifty may cross the hurdle of the 3000-mark in the next few trading session and could move up to the 3100-level.

There is also a huge build-up in 2,800 and 2,900 put options through put writing, indicting that traders expect the index to have strong support at 2,800-2,900-levels.