Traders wary of fresh positions

F&O OUTLOOK

The Nifty staged a late rally on Tuesday after scaling to a new two-year low of 3,537 on the back of lower-level buying in battered blue-chips such as Reliance Industries, NTPC, Bharti Airtel and Bhel. However, the index closed marginally above its previous day’s close, indicating that market players are afraid of taking positions at higher levels.

Markets opened on a positive note on the back of a 50-basis point cut in the Cash Reserve Ratio (CRR) by the Reserve Bank of India (RBI) and a rollback on participatory notes (P-note) curbs. However, weak global cues pushed the indices into the negative zone in the afternoon trades, witnessing alternate bouts of buying and selling.

After an extremely choppy session, the Sensex finally closed at 11,695 (down 106 points), while the Nifty ended the day at 3,607 (up 5 points). The Nifty October futures were trading at a premium of around 30-35 points to the spot market for a major part of the session, but contracted to around 10-15 points towards the end of the session.

The Nifty October futures added an open interest (OI) of 3.44 million shares during the intraday trade, while its premium to the spot market increased to 40 points. It witnessed selling pressure above the 3,700 level. However, F&O traders were buying the index below the 3,600 level, even as 33 per cent of the volume were concentrated on an average of 3,577.

Trading in the Nifty options suggests that derivatives players expect the index to trade between 3,500 and 3,600 in the near future, while it has strong resistance between 3,700 and 3,900. This is because there is fresh selling at the 3,800-3,900 strike call options and short-covering at the 3,650-3,800 strike put options.