F&O Outlook: Key support for Nifty at 4,100

The key benchmark indices gained around a per cent each on short covering and fresh buying in auto, fast moving commercial goods and capital goods stocks. Index heavyweights Reliance Industries and Infosys Technologies closed in the red on creation of fresh short positions in the futures & options (F&O) segment.

The Nifty July futures closed at 11 points discount to the spot and shed an open interest (OI) of around half million shares, indicating unwinding of long positions. According to a technical analyst at JM Financials, support at the 4,100 level is crucial for the Nifty's rise. A close below this level may result in the index declining by another 3-5 per cent. Moving averages have been broken for the first time since the first week of March, and the 13-day average is below the 8-day average now. The level of 4,225 needs to be crossed for any sustained rise in the index.

A build-up of fresh short position was visible at the 4,200-4,300 calls, while unwinding of long positions was seen at the 4,400-4,800 calls. It shows that the Nifty will face strong resistance between 4,200 and 4,300. If the index closes above 4,300, then it would not go above 4,400. The intra-day trading volume in the Nifty July futures also indicates profit booking above the 4,200 level. The put writing was seen at the 4,000-4,100 level, indicating an immediate support for the Nifty going forward. Traders, however, unwound their short positions at the 3,700-3,800 strike puts as they expect the index to fall below 3,900 if the 4,100 support level is broken.