Traders expect further weakness

F&O OUTLOOK

The Nifty opened on a negative note and closed at 4130, down 90 points, on fresh selling in frontline stocks, including those of banking, technology and realty. Reliance Industries surrendered its early gains and closed 1.6 per cent lower on build-up of short positions at higher levels.

Technically, the index is stuck in the range of 4090 to 4240 in the last couple of days and any breakout either side will decide the market trend. However, with derivatives expiry on Thursday, it is very difficult for the index to have a breakout above 4242 levels.

The options buyers were seen selling their position in 4000 Strike Call and Put of September series while some Put writers were seen unwinding their positions in 3900 and 3800 Strike Puts. This indicates that traders expect fresh weakness in the market ahead of the expiry. However, the Nifty PCR OI for September series is at 0.77, which indicates oversold positions, and hence we may see some short-covering before expiry.

IT stocks ended the day with fresh losses on delivery base selling on cash segment. Among frontline stocks, Wipro and TCS fell by around 6 per cent each and Infosys Technologies and Satyam Computer declined by around 5 per cent. The F&O traders were wary of building fresh positions as rollovers in the October series were lower compared to previous month.

Only two days remain for F&O expiry rollovers in Nifty October series. The Nifty October series were at 15.95 million shares compared to 15.92 million shares last month.

The impact study on Lehman bankruptcy by Edelweiss Research suggest that Indian vendors are the least affected, but Wipro stands to lose the most. According to the study, Wipro's Lehman receivables is at $6-8 million, while annualised revenues from them could be $32-40 million.