Key benchmark indices today fell below the breakout levels on profit-taking and weak global cues.
The Instanex FII and DII index has underperformed the Sensex and the Nifty, indicating that institutional investors booked profit. Selling was seen in index heavyweights Reliance Industries (RIL), Bharti Airtel, Infosys Technologies, ITC and Larsen & Toubro (L&T) as these stocks have declined by over 2.50 per cent each.
Going by the trading pattern in the Nifty futures and options (F&O), the market should see a fresh bounce-back in a day or two. The trading volume in the F&O segment remained steady, and despite a 1.5 per cent decline in the Nifty, the September futures traded at a premium of 11 points to the spot and added an open interest (OI) of 1.11 million shares. The intraday volume in the Nifty futures suggests that traders have bought the futures at every dip below 4,660.
The trading volume in call options continued to be above the 4,700 strike price, indicating that the Nifty has a strong support below 4,700. The Bloomberg data suggest that traders have bought the 4,700 call and written the same strike put, indicating that the support for the Nifty can move up after the index moves convincingly above 4,730. Also, the 4,700 call has added an OI of 448,250 shares mostly through the buy-side trade.
A considerable build-up was observed in the 4,900 call while traders were unwinding their positions at the 5,000 call option. This is an encouraging development and hence we may see a fresh rally in the market if the Nifty closes above 4,730. The 4,600 put has added an OI of 0.87 million shares, the highest among put options, indicating strong support levels for the Nifty going forward.
