The Nifty made an attempt to bounce back in the afternoon trade but faced stiff resistance after crossing 4,350 levels. The crossing over of 4,350 levels was crucial for further upside but the Nifty closed around the previous day’s level, making Doji Pattern, which indicates uncertainty.
The Nifty July futures closed at three points discount to the spot from the intra-day discount of 15 points. The open interest (OI) declined by 72,100 shares despite trading volume of 32.2 million shares.
The Bloomberg data suggest that 51 per cent sell-side trades changed hands at an average of 4,345. This means traders did not build up fresh positions and were unwinding long positions.
According to technical analysts at JM Financial, the market is consolidating without clear direction triggers. The participants are not willing to commit themselves before the big event (the Union Budget) on Monday and this explains the huge volatility without a breakout on either side. The market will remain in the bull grip till the index trades above the support zone of 14,300/4,250.
Speculators were selling their long positions in several stocks futures as they expected a fresh correction tomorrow.
The OI in 119 stock futures declined by over 22.48 million shares, largely due to profit-booking from long traders. The OI in Idea Cellular and Tata Steel declined by over 1.50 million shares due to unwinding of long positions.
Options traders were seen selling out-of-money puts (3,800-4,100) and calls (4,500-5,000) expecting that the Nifty has upside resistance at 4,450 levels and strong support at 4,100 levels.
In fact, out of the total volume of 23.26 million shares in call options, OTM calls accounted for 68 per cent. Similarly, OTM puts accounted for 58 per cent of trading volume in put options.