Fresh decline possible in next few sessions

The benchmark indices fell around 3 per cent each on unwinding of long positions in the Futures & Options (F&O) segment as investors expected fresh corrections. Real estate, metal and bank stocks led the fall but automobile and cement stocks bucked the trend due to encouraging sales numbers for June 2009.

In the F&O segment, fresh short build-up was seen in Reliance Industries, ICICI Bank, State Bank of India, Unitech, DLF and Tata Steel. The Nifty broke the most crucial support of 4,100 and closed at 4,078, indicating that fresh decline is possible in the next couple of sessions.

The Nifty July futures witnessed unwinding of long positions by around 2 million shares. However, bears created fresh short positions as open interest (OI) in July futures increased by around 460,000 shares. Market analysts expect 100-150 points correction in the Nifty.

Speculators have built fresh short positions in several stocks futures on expectation of more corrections. Among index stocks, OI in Unitech, DLF, Tata Steel and ICICI Bank increased by over 1 million shares each, while OI in State Bank of India, Suzlon, Larsen & Toubro and Reliance Industries increased by 500,000-750,000 shares.

Options traders expect the Nifty to get support at 3,700 if the 4,050 level is broken. Traders were seen buying the 4,000 strike call and put on expectation that the index will see a sharp rise or fall on either side of the breakout at the 4,050 level.

Options traders unwinded short positions at 3,900 puts and bought 3,800 puts as they expected 3-5 per cent fall if the Nifty loses the above-mentioned support.