As expected, the Nifty could not sustain above 4,700 and closed at 4,680 as investors booked profits. The Instanex FII index of 15 stocks underperformed the benchmark indices. The index was down 0.78 per cent while Sensex fell 0.6 per cent. The FII index indicates that foreign investors have sold shares of Bharti Airtel, HDFC, Infosys Technologies, HDFC Bank, ONGC and Sun Pharmaceuticals and bought shares of Hindustan Unilever, Reliance Industries and State Bank of India.
The Nifty August futures traded at 15 points discount to the spot intraday and closed at a discount of two points, indicating build-up of short positions at higher levels.
The futures shed open interest (OI) of 1.82 million shares at close compared with intraday build-up of 1.52 million shares. This means short build-up from bears and profit-booking from bulls at higher levels. The trading volume in index futures rose sharply yesterday, indicating that traders have started distributing the OI in weaker hands. This can lead to further correction.
Options traders booked profit at 4,600 and 4,700 calls on expectation that a fresh correction could take the Nifty below 4,600 in the near future.
Operators wrote 4,800-5,000 strikes calls as they expect that the Nifty is unlikely to trade above 4,800 in the near future. The 4,600 and 4,700 puts together added OI of 1.21 million shares, which is considerably high as Nifty is trading at in-the-money levels. The blend of buy and sell indicates that some traders expect the Nifty to fall below 4,600 in the near future. The support is seen near 4,550-4600 levels.
