Short covering at lower levels

F&O OUTLOOK

The Nifty closed significantly in the red due to selling pressure in heavy-weights. Nifty futures declined by 2.04 per cent, while the open interest rose by 9.06 per cent or 69,775 contracts to 859,553 contracts, indicating the creation of short Nifty positions. The prevailing OI is the highest this month.

The January futures closed at a premium of 12 points, as against a discount of 2.85 points yesterday, indicating buying at lower levels. Despite the Nifty futures hitting a low of 5,831, the average traded price was 5,925, indicating the absence of selling at the day's lows.

Though the benchmark indices closed weak, the advance decline ratio improved to 1:2 from 1:9 yesterday. A significant amount of short-covering was seen in stock futures that registered intra-day falls of over five per cent.

In the cash segment, ACC recovered by 11 per cent, BPCL, 6.81 per cent, ICICI Bank, 6.81 per cent and Bharti, 5.52 per cent from the day's low.

Short covering was also seen in Bharti Airtel (OI declined by 6.53 lakh shares), BPCL (OI down 44,000 shares) and Reliance Petroleum (OI down 23.52 lakh shares). The open interest in these stocks declined, while the stocks moved up.

The Nifty PCR declined from 1.25 to 1.22 on account of call writing. Implied volatility increased from 32 per cent to 34 per cent, indicating uncertainty among the market participants. A good amount of short covering took place in 6000 Put options, indicating a breach of support at this levels.