Continuing Wednesday’s weak trend, the markets opened in the red and declined steadily as the session proceeded on Thursday. Across-the-board selling led the Sensex to finally close at 14,325, down 338 points, while the Nifty closed at 4,290, declining by 110 points.
The Nifty has pinned its last hope at the 4,280 level and if it closes below this, short- and medium-term trends would get reversed. However, the market is likely to open on a weak note as the SGX CNX Nifty traded at 4,236 on the of Singapore Exchange against a close of 4,300 on NSE.
According to technical analysts, range-bound indices suggest that the bulls are edging out the weaker bears before the clean-up trend begins. For the uptrend, the Nifty has to maintain its support at 4,280 and we may then see a small rebound up to 4,400.
Nifty September futures, which added the open interest (OI) of 4.78 million shares during intraday trade on Thursday, probably as a result of a build-up in short positions, witnessed settlement of the entire OI during the off-trade session. If this settlement is in the form of long positions, we may then see a further correction in the Nifty, going forward.
The 4,500 call saw huge writing and it has clearly emerged as the resistance for the index. The 4,500 call options have OI of 5.90 million shares, which are 21.4 per cent of the total OI in call options. The 4,600 call witnessed a huge buying in the last couple of weeks.
The 4,200 and 4,300 puts witnessed a decline in OI by almost one million shares, indicating that put writers expects a further weakness in the Nifty. Puts were written at the 4,100 strike and it is likely to be the new support base for the Nifty.