The benchmark indices opened on a weak note and extended losses in late trade led by the fall in capital goods and banking stocks. Index heavyweight such as Reliance Industries, ICICI Bank and State Bank of India fell between 2 and 6 per cent on unwinding of long positions in May futures by around 200,000-400,000 shares each. With only five trading days remaining for the expiry of the May series, July futures of these stocks witnessed fresh rollover from bulls and bears.
The Nifty May futures closed with 9 points premium to spot and shed open interest of 2.87 million shares indicating unwinding of long positions at higher levels. Bloomberg data for the day indicate short covering in the Nifty May futures at around 4,240 levels and unwinding of long positions at around 4,320 levels. The Nifty June futures closed with 10 points premium to spot and added open interest of 1.26 million shares indicating rollover of long positions.
The trading pattern in the Nifty options suggest that the index has support at 4,150-4,200, while resistance above 4,400 levels. The traders were making long straddle at 4,200, as there were not sure above the index movement at the current level. The long straddle means buying of same strike call and put options. The put writing was evident at the 4,000-4,150 suggesting strong support for the index. The call writing was seen at the 4,300-4,600 strikes calls indicating strong resistance above 4,300 levels.
The index heavyweight Reliance Industries witnessed a fresh weakness as its May futures declined by 1.8 per cent and shed open interest of 355,800 shares, while June futures down 1.7 per cent added open interest of 297,900 shares. This means traders booked profit in the May futures and rollover short positions in June futures.