The Nifty closed in the red after hitting the resistance point of 2,805 on profit-taking and early slide in European markets. Banking, IT and realty stocks led the decline. Technically, 9,000 for the Sensex and 2,800 for the Nifty are acting as strong resistance points, and it would be difficult for the indices to close beyond these levels.
The upside on domestic bourses would be capped in the next two months due to political uncertainty ahead of parliamentary elections slated between April 16 and May 13, 2009, according to market analysts. The Nifty April futures also indicate this as bear operators have been adding OI on a daily basis. The April futures added an OI of 1.38 million shares today, taking the total OI to 6.52 million shares.
The 2,800 call options are holding the highest number of contracts, but there was no significant unwinding, although the Nifty crossed 2,800 in intraday trade. Profit-booking was seen at 2,800 call, but there was no significant drop in OI at the close of the day, indicating that 2,800 strike call writers were not willing to cover their short positions. This means, 2,800 is a strong resistance point.
Daily indicators have now turned overbought, while technical studies continue to point at levels below the October 2008 low by the first week of April. Though, the Nifty March futures were trading at a marginal discount to the spot, the bulls booked profit at higher levels as the OI declined by 896,400 shares despite a trading volume of 40.25 million shares.
Long traders were also seen booking profit in the range of 2,400-2,700 call options as they expected the Nifty to go down if it lost the support of 2,660.
The formation of short position in the April series and profit-booking in the current month series were seen in key stocks such as Bharti Airtel, BHEL, DLF, HDFC Bank, ICICI Bank, Larsen & Toubro, Maruti, State Bank of India and Suzlon.
These stock futures witnessed a decline in OI in the March series and an increase in the April series.
