Short-term mood looks bearish

F&O OUTLOOK

The Nifty recovered sharply on Wednesday from the day's low 3,861 and tested the 4,000 mark, finally closing at 3,950 with a gain of 30 points. The recovery was possible on account of a subdued buying in technology, banking and FMCG stocks.Realty and oil and gas stocks continued to reel under the selling pressure.

Information technology stocks pulled the market up, with HCL Technologies, Infosys Technologies and Satyam Computer gaining 3-7 per cent each on covering of short positions and a build-up of fresh long positions. There was good demand on the Infosys counter and its October futures added an open interest (OI) of 187,800 shares with the cost-of-carry rising sharply to 15.2 per cent. Satyam Computer gained 7.3 per cent, while the OI increased by 11 per cent, indicating a build-up of long positions.

Among banking sector stocks, HDFC Bank witnessed lower-level buying as it rose 6.8 per cent from the day's low on short-covering and a build-up of long positions. ICICI Bank rose 6.5 per cent from its day's low as F&O traders added an OI of 694,925 shares on expectation that the worst for the market was over. The trading pattern on the F&O segment suggests that the Nifty has strong support at 3,800 and resistance at the 4,200 level. The 3,800 strike put has a cumulative open interest of 4.02 million shares, while the 4,200 call strike has an open interest of 3.23 million shares.

Technically, the Nifty has resistance at 10-DMA (daily moving average), which is at 4,060. The market outlook for the short as well as the medium term remains bearish with a reversal point at 4,200. According to technical analysts, the index could see the worst of times only if it closes below 3,750.