F&O Outlook: Positive surprises are unlikely

The trading pattern in the Futures & Options (F&O) segment suggests that the Nifty could breach its immediate support of 4,820 and find support at 4,750. Daily technical indicators are currently oversold but without any backing from other studies. According to a technical analyst at JM Financial, the chart set-up remains weak and hence positive surprises are unlikely.

The Nifty closed at 4,841, marginally above the 50 days moving average of 4,824. If the Nifty breaches this support tomorrow, it has strong support at 4,760, which is 161.8 per cent retracement of its recent rally from 4,921 to 5,182. However, the Nifty call and put options data suggest that the index should close around 4,850-4,900 on the expiry day (Thursday).

The key benchmark indices on Tuesday extended losses in late trade as investors booked profit. The BSE 30-share Sensex was down 387 points while S&P CNX Nifty was down 124 points. Banking stocks fell as RBI did not relax the mark-to-market rules for banks’ debt holdings. Rate-sensitive realty stocks declined over 6 per cent due to profit-booking.

The Nifty October futures closed at a premium to spot and shed 3.24 million shares in open interest, indicating profit-booking when the index was trading above 4,950 levels. Interestingly, though the Nifty October futures closed at 4,848, the trading average for the day was at 4,900 levels. This means traders were not willing to sell their long positions below the 4,900 levels. We may see some recovery in the market tomorrow.