More corrections likely

Benchmark indices Sensex and Nifty dropped for the second day today as traders booked profits and built fresh short positions on disappointment over the Interim Budget and weak world markets. Heavyweights such as Reliance Industries (RIL), ICICI Bank, Tata Steel, Suzlon Industries and Unitech witnessed short build-up in the futures and options (F&O) segment and were down 3-6 per cent each.

The trading volume in the F&O segment dropped by Rs 6,000 crore as traders were cautious on long positions in index and stock futures. Nifty February futures continued to trade at a discount to the spot and shed an open interest (OI) of 2.02 million shares, indicating unwinding of long positions. March futures of Nifty closed with a five-point discount to the February futures and added an OI of 1.77 million shares, indicating short build-up.

Unwinding was observed in most of the put options, mainly at 2,800 and 2,900 strike, in the last few days, indicating that traders expected the Nifty to trade below 2,800 going forward.