The July futures contracts traded at an average discount of around 80 points and the open interest increased by three million shares in intraday trading, indicating the creation of short positions.
Two million shares were, however, squared off in after-market trading and the discount came down to 45 points. A total of 1.3 million shares were carried forward. The rollover of short positions and the unwinding of longs clearly indicates that the market may test another low.
The Nifty options trading activity also signals weakness. The operators bought puts at 3700 and 3800 strike prices, while unwinding puts at the strike prices of 4000-4200. With the Nifty 3700 puts adding open interest of one million shares at an average premium of Rs 109 a share, the Nifty is likely to test 3600.
Out of the 50 Nifty stocks, 45 stock futures saw an addition in open interest accompanied by a decline in prices, while four stock futures registered a decline in both open interest and prices.
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State Bank of India was the only Nifty constituent that saw a rise in both open interest and prices. A total of 3,37,656 shares were added, with a 1.5 per cent rise in the futures prices.
SAIL, Idea Cellular, NTPC and Cairn India witnessed a short build-up of one to two million shares each, accompanied by a 5-10 per cent decline in the futures prices.