Nifty may trade below 3,600

F&O OUTLOOK

The Sensex and the Nifty shed over 3 per cent each from the day’s high to close with marginal gains on Tuesday on account of profit-booking across sectors. Technically, the market was in the sell mode above 11,750 for the Sensex and 3,650 for the Nifty. Both the indices retraced sharply after hitting these levels. Technical analysts expect the market to move down further.

Taking cues from their global peers, the domestic market opened on a buoyant note, but indices came off their highs and pared most of their gains. The Sensex closed at 11,483 (up 174 points) and the Nifty at 3,518 (up 28 points). The Nifty October futures, after trading at a premium of around 30 points to the spot market for a major part of the session, closed with a modest premium of nine points. The decline in premium-to-spot and an increase in the open interest (OI) of 1.52 million shares after a sharp sell-off at higher levels indicate that F&O players have initiated fresh short positions.

Barring frontline technology stocks, profit-booking was seen across index heavyweights such as Reliance Industries, ICICI Bank, State Bank of India, Larsen & Toubro and Bhel. ICICI Bank and Reliance Industries witnessed a decline in the OI, largely on account of profit-booking, while SBI, L&T and Bhel witnessed a modest increase in their OIs, mostly on account of creation of short positions at higher levels.

Profit-booking and fresh call writing were seen at 3,600, 3,700 and 3,800 strike call options, indicating that call buyers expect that the index is not likely to trade above 3,800 and there would sharp resistance above the 3,600 level. Traders were seen buying 3,300-3,600 strike puts, indicating that the index would trade below the 3,600 level and may test its recent lows.