Nifty unlikely to cross 2,700 for now

F&O OUTLOOK

As expected, the Nifty on Tuesday faced resistance at 2,800 and then declined below the support level of 2,700 on account of profit-booking in index heavyweights. The index closed at 2,654, down 52 points, as heavyweights such as Reliance Industries, State Bank of India, Bharti Airtel, ICICI Bank and Larsen & Toubro witnessed a complete selloff during the post-lunch session.

Options traders were seen buying 2,500-2,800 strike puts despite only two trading days left for the expiry of the November series. This means that traders do not expect the index to move above the 2,700-level. They feel that it may not even hold the 2600-level. Traders expect the index to move between 2,500 and 2,600 till the expiry on November 27.

The Nifty futures witnessed profit-booking and creation of short positions at higher levels. The Bloomberg data suggest that Nifty November and December futures witnessed strong selling at higher levels, with almost 55 per cent of the trades taking place after 12.41 pm, when the index was hovering at the day’s high of 2,810.

Among the key stocks futures, RIL, SBI, Bharti Airtel and ICICI Bank witnessed profit-booking and a fresh short build-up at the day’s high levels. Volumes in these stocks had been around 45-65 per cent after 12.40 pm, indicating that most of the short positions were created during the afternoon session.

Rollovers picked up on Tuesday, with the Nifty December series adding an open interest (OI) of 3.84 million shares and taking the overall rollovers to 15.5 million shares from 11.25 million shares on Monday. The increase in rollovers has been on account of the selloff at higher levels, indicating that the bear operators were waiting for markets to go up before taking short positions.

However, two day’s ahead of the expiry of the current series, rollovers at 15.50 million shares were substantially lower compared with those of 22.36 million shares during the same period for the November series.

This means that the bulls have not rolled over their long positions as yet.