Nifty resistance seen at 2,800

F&O OUTLOOK

The market opened higher On Monday, buoyed by overnight gains in the US markets, but pared early gains as investors’ sentiment turned cautious. The Sensex and the Nifty declined sharply after testing key resistance points of 9,325 and 2,830 respectively, following profit-booking in the cash segment and creation of short positions in the F&O segment.

The Nifty December futures, which traded at a premium of 10-15 points to the cash market in the morning session, closed at a discount of four points to the spot market. The settlement data, put out on the NSE website after trading hours, show that the open interest (OI) in Nifty futures has increased sharply by 1.31 million shares, indicating that F&O players have initiated short positions.

Key stock futures, including Reliance Industries, State Bank of India, Bharti Airtel, ICICI Bank and HDFC Bank, too witnessed profit-booking and a fresh build-up of short positions at higher levels. The Bloomberg data showed that profit-booking in the closing hours of trade had been intense as almost 35-40 per cent trading in these stock futures took place in the last 90 minutes of trade.

The F&O data suggest that the Nifty has support at 2,500 as the OI in the December series at this level is the highest at 3.09 million shares. Similarly, there is a huge build-up of the OI in the 3,200 call option (2.66 million shares), indicating the resistance level. Hence, the Nifty may trade in a broader range of 2,500-3,200 until the December series expiry.

Options traders were seen writing calls at 2,800 (OI up 62 per cent) and 2,900 (OI up 59 per cent) and writing 2,500 strike puts (OI up 14 per cent), indicating that the Nifty has resistance above 2,800 and support at 2,500.

We had indicated in our weekly F&O outlook that the Nifty has to close above the 2,780-level for the short-term upside up to 3,000 and maintain the support of 2,700 for any trend reversal, which can take the index to 2,500.