The markets traded flat through most of the session, but weakened in the last hour due to the rollover of short positions in index futures and weak rollovers in stock futures. The Nifty traded between 4320 and 4350 before closing at 4292, which was well below the 38.2 per cent retracement level of 4330.
The Nifty September series saw trading volumes of 10.44 million shares, with 39 per cent of the trades being executed in the last hour at an average of 4300. The rollovers more than doubled to 21.25 million shares, but the discount indicates a build-up in short positions.
The Nifty is stuck in the 4250-4400 range and a decisive move will depend on a breakout on either side. The Nifty PCR OI at the 4300 strike price was marginally above one, while the PCR OI at the 4400 strike remained below one. The covering of 4300 put positions suggests that the August series contract will close around 4300.
The foreign investors have created short positions in both index and stock futures and their open interest has risen by more than 120,000 contracts each between August 6 and 26, largely on account of build-up in short positions.
The futures of ICICI Bank, HDFC Bank, Bharti Airtel, BHEL, Chambal Fertilisers, Grasim and Larsen & Toubro were rolled over at a modest premium, which shows that long positions were carried forward. On the oher hand, the DLF, Reliance Industries, NTPC and State Bank futures were carried forward at a discount, indicating a build-up in short positions.