Traders expect to see decline

F&O OUTLOOK

The Nifty is expected to open on a positive note on strong global cues. The Nifty is likely to cross 2,600 mark and even try to pierce the 2,660 levels on short covering in banking and key index stocks. Nifty though failed to sustain at higher levels on Monday and closed the session in a bearish candlestick, it had maintained support at 2525, which is important levels to stem the downtrend.

The futures and options (F&O) traders had anticip-ated fresh decline in index with the Nifty losing its support of 2,500 was not ruled out. The traders unwound their short positions at 2,500 put on this anticipation as data trading data show a negligible increase in open interest despite a trading volume of 9.89 million shares.

The Nifty March futures added open interest of 547,450 shares on Monday while its discount to spot increase from 12 points to 27 points indicating that F&O traders expects the index to go down further. The April futures which closed at a discount of 15 points to March futures also added open interest of 478,100 shares indicating that some traders expects the Nifty to weaken further during general election period.

The markets may see some recovery on strong global cues as traders went short even at 2,550 levels may cover their short positions tomorrow says Siddhartha Bhamre, equity and derivative analyst at Angel Broking. We may see Nifty futures discount to spot coming down and the futures moving above 2,600 is not ruled out. However, the recovery may short lived and expected to fizzle out once Nifty crosses 2750 levels says Bhamre.

The key index futures such as Reliance Industries, SBI and ICICI Bank expected to open on a strong note on short covering. State Bank of India (SBI) March 2009 futures has closed at Rs 889.10 on Monday compared to the spot closing of 895.30 and had built-up short position of 309,704 shares.

Reliance Industries March 2009 futures closed at Rs 1,151 compared to the spot closing of 1,153.35. Reliance futures added open interest of 121,500 shares largely due fresh short build-up. ICICI Bank March 2009 futures short covering of around one million shares as its March futures closed near spot price of Rs 262.95.