Run-up to expiry crucial

F&O OUTLOOK

The markets have posted gains for the fifth day in a row. However, the open interest of almost Rs 99,000 crore and the five-day relative strength index (RSI) at 92 means it is still in trouble waters. The next two days of the expiry of the July series are crucial for the markets.

The Nifty level of 4,600 should be protected in the next few days, failing which the Nifty can decline to the next support level of 4,550. The put/call ratio of the Nifty open interest edged up from 1.77 to 1.78.

The Nifty on Tuesday added an open interest of 8.27 lakh shares in put options and 4.29 lakh shares in call options. The Nifty discount to underlying marginally moved up to 11 points.

The Nifty rollover increased to 39.9 per cent while the rollover in stock futures was higher at 42.5 per cent. Though the trend remains up, there are some problems.

The last five days saw three bear attacks. Also, the days when the markets were up, the advance-decline ratio was flat to negative. The rise in volumes coupled with the negative breadth means there is trouble ahead.

On Tuesday for instance, the BSE Sensex gained 62.72 point at 15,794.92, but only 13 Sensex stocks advanced while 17 declined.

The market wide advance-decline ratio was 890:1774 on the BSE. The turnover on the BSE cash segment increased to Rs 6,464 crore from Rs 4854 crore. The turnover on the NSE increased to 13,276 crore from 10,720 crore, with an advance-decline ratio of 315:794 .

Tuesday's rally was triggered by steady buying interest for capital goods, power and IT stocks. But auto, cement, FMCG and pharmaceuticals shares saw selling pressure.

The market was choppy on Tuesday, which is likely to be the case over the next two days ahead of the expiry of the July 2007 derivatives contracts on July 26.