Support at 4,900 likely to melt soon

The Nifty remained listless after opening on a positive note on lack of follow-up buying in cash and F&O segments. With traders unwilling to be active at higher levels, the derivatives trading volume dropped significantly by Rs 10,000 crore. The Nifty December futures closed on a par with the spot index and shed 1.24 million shares in open interest (OI), mostly through a blend of buy and sell trades, indicating short-covering and unwinding of long positions. The rollovers in the Nifty January were lower at 0.78 million shares compared to unwinding in the December futures. This indicates that participants are not in a hurry to rollover their positions at the current level.

The trading pattern in call and put options suggests the Nifty may hold support of 4,940 and slip below the 4,900 level in near future. The options participants seem to have covered their short positions at 5,100 and 5,200 strike puts and bought the 5,000 put as they expect the Nifty may face strong resistance above the 5,000 level. Fresh weakness has also been noticed as participants bought the 4,900 put (OI up 846,150 shares) as they expect the 4,900 support to go. The 4,800 put witnessed change of hands from sellers to buyers as this strike put added an open interest of 55,200 shares despite a trading volume of 3.26 million shares.

The stock futures participants expect the market to weaken soon as rollover in the January futures in key stocks such as Bharti Airtel, HDFC, Hindalco, Infosys Technologies, Larsen & Toubro and Mahindra & Mahindra were lower than unwinding in the December futures. Short rollovers were seen in DLF, Hero Honda, Hindustan Unilever, ICICI Bank, ITC and NTPC, while a fresh long build-up was seen in Tata Steel. The Tata Steel January futures added 1.15 million shares in open interest through buy-side trades on expectation of a fresh upmove in Tata Steel soon.