The S&P CNX Nifty recovered by almost 200 points on Wednesday from the intra-day low of 3,329 to close at 3,513 on short-covering in the key index stocks. The Nifty October futures recovered from 3,352 to close at 3,553 on short-covering at lower levels.
The Bloomberg data show that F&O players were shorting the index during the morning trade and covering their short positions in the afternoon trade.
Key stock futures such as Reliance Industries, ICICI Bank, Larsen & Toubro, Infosys Technologies, HDFC Bank, Bhel, Reliance Communications and Bharti Airtel witnessed short-covering after most of the stocks fell by over 5-10 per cent each.
F&O traders were seen buying 3,600-3,800 strike call options, while short-covering was seen at 4,000-4,200 strike call options.
This indicates that some players were covering their short positions in index futures by buying 3,600-3,800 strike call options, while others were covering their short positions of 4,000-4,200 strike call options.
The 3,500-3,700 strike puts witnessed short-covering as the OI at these puts declined by 5-10 per cent despite a sharp increase in trading volumes.
Meanwhile, short-covering of positions at higher levels by F&O traders may come as a blessing when markets open for trading on Friday.
This is because the US Federal Reserve, the European Central Bank and four other central banks announced 50 basis points rate cuts in an emergency coordinated bid to calm the tense global financial markets. The announcements or rate cuts came after the domestic markets closed.
