F&O Watch: Selling seen at higher levels

The markets saw huge built up in Nifty futures open interest (OI) in the morning as nearly 29 lakh shares were added as the markets remained weak, however significant short covering of these intraday positions was seen as towards the end of session. At close OI in Nifty futures increased by 2.19 lakh shares.

The Nifty discount was trimmed down to almost 15-20 points.

Keeping in mind, some recovery shown by Nifty from lower levels towards the end of session along with the short covering, we may see markets opening on a bit positive note.

However, we expect selling pressure to creep in from higher levels given lack of fresh built up in individual stocks and also increased implied volatility of Nifty.

Significant unwinding of positions is seen in Reliance Capital (-20%), RIL (-7%) and also in other stocks like Ashok Leyland, Colgate, Guj Ambuja, Hindalco, India Cements, IPCL, MTNL etc as OI has remarkably decreased. The market wide OI position has declined by 13.47 million shares.

Put Call Ratio Analysis

PCR of Nifty further dipped to 0.64 against 0.70 the previous day as the call options have added over 9 lakh shares (+11.5%) whereas the put options also have seen marginal addition of 1 lakh shares (+1.9%).