Upsides not sustainable

F&O OUTLOOK

The bulls' comfort levels were broken today with S&P Nifty spot and September futures closing below 4,500. The only positive: there were no fresh shorts being created and the futures discount to spot Nifty was rangebound at 10 points.

The F&O turnover declined today to Rs 35,768 crore, the lowest since September 3. The turnover of index futures fell below Rs 10,000 crore to Rs 9,883 crore, while stocks futures' was Rs 20,335 crore, the lowest since August 24.

The Nifty failed to breakout over 4,545, though it crossed the level twice. However, the cause for concern was that Nifty closed below 4,500, which acted as support level during the week ended September 14. The open interest (OI) in Put and Call options suggests that 4,500 is likely to be a battlefield for bear and bulls.

The 4,500 Call options added OI of 1.59 lakh shares, while 4500 Put options added OI of 3.86 lakh shares. The out-of-money Call writing was seen near 4,600 and 4,700 levels, while out-of-money Put writing was near 4,300 levels. There was some movement for in-the-money Call at 4,400 levels and in-the-money Put at 4,600 levels.

The markets are awaiting the US Federal Reserve announcement, which will give the much-needed direction. According to Kamalesh Langote of vfmdirect.com, the breakout can happen any time, but it is unlikely that the Nifty will break the support level of 4,450. However, upside breakouts may not be sustainable.

The short-term remains bullish. The Put Call Ratio of Nifty is at a comfortable level of 1.52, thus, expect a further rally in Nifty in the coming days. The Nifty Put added OI of 11.99 lakh shares, while Call options added OI of 7.82 lakh shares.