Though the Nifty closed slightly below 5,000 today, the trading volume in the put and call options suggests that bulls will find it difficult to hold on to this level.
The Bloomberg data indicate selling in the October series 5,000 strike call with almost 55 per cent of the total volume changing hands in the last two sessions. The 5,100 and 5,200 calls today witnessed change of hands, possibly selling of long positions built up in the past few sessions.
Going forward, the Nifty has an immediate resistance at 5,015 and support at 4,941. After breaching 4,941, the Nifty could test the next support, or lower end, at 4,750. The put option traders were today seen buying 4,700-5,000 strike puts, indicating that they expected the index to test the lower end of support.
The open interest (OI) in 4,700-5,000 puts of the October series today increased significantly by 40-60 per cent, or 3.78 million shares, with the 4,900 put adding 1.60 million shares. The 4,900 and 4,800 puts now hold more than one-third of the total put OI and hence the index has strong support between 4,800 and 4,900.
The Nifty tested 4,900 intraday and closed at 4,986.55 as anticipated. The strong rollovers in the Nifty futures, intraday short-covering and recovery in Dow futures also aided the recovery. The owner indices compiled by Instanex Capital suggested that domestic institutions had supported the market at lower levels when foreign institutions booked profits.
The rollover in the Nifty October futures was marginally higher at 24.71 million shares compared to 23.05 million shares in the September futures same time last month. The futures have been trading at a premium to the spot for more than a week now, and hence most rollovers appear to be long build-ups. However, today’s intraday trading volume suggested that bears built up short positions when the index was trading above 4,985.
