Traders expect index to move below 5,000 in near future

F&O OUTLOOK

The Nifty faced resistance above 5,150 and closed at 5,108 on profit-booking. The Nifty October futures closed at a premium to the spot and shed 481,500 shares in open interest (OI), indicating profit-booking at higher levels. The trading volume in the Nifty options suggests that traders have started hedging their long positions in the Nifty futures by buying out-of-the-money put options.

With almost three weeks to go for the expiry of the October series, buying was seen in out-of-the-money and at-the-money puts. The 4,800-5,100 strikes puts together added 1.44 million shares in open interest with buy-side trades accounting for 52-55 per cent of the total. For example, the 4,800 put saw 67,105 trades, of which 53 per cent were buy-side deals.

The 5,000 put, the most-traded one, saw change of hands mostly in the form of short-covering by put writers as open interest in this put increased by 357,250 shares despite trading volumes of 10.78 million shares. Bloomberg data indicated that 56 per cent volumes in this put changed hands through buy-side and neutral trades while only 44 per cent changed hands in sell-side trades. This means traders expect the Nifty to move below 5,000 levels in the near future.

Traders unwinded the 4,900 strike call, which is trading at a premium of Rs 241, indicating profit-booking. The 5,000 strike call added 283,000 shares in open interest, mostly through sell-side trades, which indicates that 5,000 levels may lose support in the near future. The 5,100 call, the most traded one, added 137,350 shares in open interest despite trading volumes of 11.86 million shares, indicating that traders booked profit and created fresh short positions on expectation of a fresh sell-off above 5,100 levels.

Telecom giants Bharti Airtel and Reliance Communication witnessed a significant jump in open interest, mostly through change of hands, as Bloomberg data suggested that these stocks futures were evenly matched. Bharti Airtel added 2.02 million shares in open interest while Reliance Communication added 1.48 million shares in open interest. Bharti Airtel is expected to get support around Rs 320 as traders wrote the 320 strike put.