Markets to stay volatile

F&O OUTLOOK

The Indian markets witnessed a sharp reversal last week, shedding almost two-third of the gains made in the Sensex and the S&P CNX Nifty over the past three weeks.

The markets in India could open with a down gap and are likely to move further down. Supports for the Nifty could come at 4,100 and 4,050 levels as substantial open interest at 4100 put and 4050 put were added during the last week.

With nearly one-third of the put OI near 4200 Put, the market is likely to take a sharp upturn as long as 4100 holds.

According to derivative analyst Kamalesh Langote of vfmdirect.com, "We are witnessing expanding legs in this correction. This is a bullish sign. So next week, as long as 4100 holds, we should see a trend reversal. However, there is a strong resistance at the 4200 level as 23.1 per cent Call OI has been built at Call 4200 levels.

The discount on the Nifty also widened to nearly 20-25 points against nearly 10 points during the previous week.

According Zeal Mehta, analyst, Emkay Share, the Nifty close below support levels of 4200, with a 22.3 per cent increase in OI, indicates huge build up of short positions in the markets.

The implied volatility of the Nifty increased from 20-22 per cent to nearly 25-26 per cent on the previous Friday.

Therefore, we may see further downside in the Nifty. The markets may remain volatile in the coming days and thus we advise caution at current levels.