Support seen below 4,700

The Nifty opened gap-down on Friday and broke many crucial supports in the process, indicating that its further decline will be quite intense. Technical analysts are cautious about its upside, as the index is trading around 20 of its daily moving average (DMA). For any upside, benchmark indices need to cross the immediate resistances of 16,720/ 5,000 convincingly, else we could see selling pressure emerge once again, which could take the main indices towards the Friday low of 16,210/ 4,800.

The Nifty fell 4 per cent during the morning session on Friday, probably due to activation of stop-loss trades, but recovered sharply on short-covering. In the end, it closed above the technical support level of 4,900 on short-covering in index stocks. The Nifty December futures recovered sharply from a low of 4,800 to closed at 4,953, as participants who had built up an open interest (OI) of 2.51 million shares during the intraday trade, covered their positions in the end. Finally, the OI increased by around one million shares, indicating short covering.

The benchmark indices opened in the red as Dubai’s debt woes sparked fears among investors. Banking, property and construction-related shares were among the hardest hit, after Dubai said two of its flagship companies planned to delay their debt repayments. Among the Nifty components, DLF, BHEL, ICICI Bank, Larsen & Toubro fell, but recovered sharply when DLF and Unitech said they had no exposure to Dubai. Private sector ICICI Bank said it had no material exposure.

Bank of Baroda, which had a total exposure in the UAE of around Rs 10,000 crore, according to its chairman, saw its shares fall 9.5 per cent during the intraday trade, but recovered soon with a modest loss of 4.5 per cent in the end. On the F&O front, the OI in the December futures of Bank of Baroda increased by 54 per cent, or 0.86 million shares, mostly through sell-side trades, indicating short build up. Realty major DLF declined by over 8 per cent intraday, but recovered on account of short covering at lower levels.

The options traders covered their short positions in 5,000-5,100 puts, while a change of hands was seen in 4,700-4,900 puts. This indicates that the index could get support below the 4,700 level and resistance above the 5,000 level. The 5,100 call witnessed profit-booking, while 4,800-5,000 calls together added two million shares in OI, mostly through sell-side trades.