The Nifty maintained its support of 4,360 and closed the day today at 4,394 on profit-booking in auto, metal, oil & gas, power and realty stocks. Technical analysts indicate that there would be a substantial correction if the index closes below its support level of 4,360.
According to a technical analyst of vfmdirect.com, the current correction could take the Nifty to around 4,200 levels before the index could bounce back to new highs.
In the futures & options (F&O) segment, the bulls were absent as Nifty August and September futures closed with discounts to the spot, indicating unwinding of long positions. The August futures added an open interest (OI) of 4.38 million shares during the intraday trade, but at close only 523,350 shares were added. The September futures closed at a discount to the spot and built up an OI of 1.29 million shares, indicating short build-up.
A significant build-up is visible in the 4,400 and 4,500 call options. The 4,500 call added an OI of 652,250 shares at close and the Bloomberg data suggested that there was short build-up by the bears. This means the 4,500-level would continue to be the resistance level. The 4,400 call too added a significant OI yesterday and this level might act as resistance if the Nifty closed below 4,360.
Unwinding of short positions was seen in 4,400-4,700 puts which indicated that traders expected the Nifty to trade below 4,400 in the near future. The 4,300 put added an OI of 362,000 shares, the highest among put options. Hence the Nifty has a strong support around 4,300.