The Nifty futures open interest increased by 4.15 million shares to 34.35 million shares on a week-on-week basis. The futures ended at a discount of three points from a premium of 18 points a week ago. Bears have struck back with a vengeance, building up fresh short positions at higher levels.
The FIIs were net sellers of 73,926 index futures contracts (3.69 million shares), while they were net buyers of 32,413 index options contracts in the first four days (Friday data is not available) of the week. They went short on Nifty futures and bought index options as a hedge.
Technical analyst Ashish Shroff of Ambit Capital anticipates a further correction in the coming days. The sell-off was driven by the sell signals given by major momentum indicators on the intraday charts.
The daily chart momentum indicators have now turned into a sell mode and this could trigger a further fall in the market. Historically, whenever the MACD has turned from positive to negative or vice versa, the market has moved 10 per cent on either side.
The Nifty is likely to witness further selling next week and achieve the short-term target of 4940.
The index has a strong support at 4940. If the Nifty breaks this level and trades below it on a prolonged basis, the medium-term bias would turn downwards and it could go on to test 4800. On the other hand, the Nifty could consolidate in the range of 4940-5200 if it sustains above 4940.
