Weakness seen below 2600

F&O OUTLOOK

The BSE Sensex and the S&P CNX Nifty fell sharply and closed marginally below the support level on the prospect of global recession setting in. The 30-share BSE index closed 339.26 points lower at 8,951.75, while the 50-share S&P CNX Nifty fell 4.16 per cent to 2,683.15. The benchmark indices closed near the day’s lows indicating selling pressure towards closing.

Selling pressure was seen in several key index stocks such as Bharti Airtel, Infosys, Larsen & Toubro, NTPC, Reliance Communications and State Bank of India with all of them closing at their day’s lows. Reliance Industries and HDFC Bank however recovered and closed with modest losses on account of short covering at the lower levels.

The Nifty November futures closed with a premium of 12 points to spot while the December futures closed at a discount of six points to the November futures, indicating that some operators seems to be rolling over short positions. The Nifty November futures shed open interest of 725,500 shares while the December futures added open interest of 600,900 shares, indicating unwinding of long positions and rollover of short positions.

Options traders were seen unwinding their positions at 2500-3000 strike puts, indicating that they expected the weakness to continue. Call buyers were also seen unwinding their long position at 2900-3200 strike calls as they expect sharp resistance for the Nifty above the 2900 levels.

Technical analysts however indicate that the current trend in the benchmark indices on end of day (EOD) charts favour bull operators. They expect the index to trade in a broad range of 2600-3200 for some time. For the up-side break-out, the Nifty has to trade above 3000 for the upper target of 3200. Support for the index is seen at 2600 and below this at the 2500 levels.