Limited downtrend likely

F&O OUTLOOK

The markets are expected to remain strong through the week. There is a marked decrease in volatility at the higher levels, indicating the comfort levels at the top. Besides, a strong OI build-up in put at 4,000 and 4,200 is a pointer to the possibility of a limited downside.

Moreover, the momentum seen during the last week is expected to take the markets further up. Last week saw a huge rally at the banking counters and in the index bellwether, Reliance Industries, as the firm global markets, a likelihood of an early monsoon and short-covering added to the party on the bourses.

The Nifty 4,000 put options have added nearly 41.8 lakh shares to OI. The Nifty 4,200 put OI stood at 21 lakh shares, with an addition of around 17 lakh shares to OI. The build-up of these positions indicates a strong support at these levels in case of a downside. 

F&O SNAPSHOT
	Turnover (rs crore)*		Open int ('000)**
	May 11,07	May 18,07	May 11,06	May 18,07
Nifty	75746.42	59801.77	66048	64462
BANKNIFTY	524.88	731.64	164	290
CNXIT	51.49	172.07	43	127
Stock	74138.36	93561.88	1218929	1424466
NSE Total	150461.2	154267.4	1285184	1489345
*Weekly aggregates notional Value  **In shares

The accumulation of the positions reveals that the market players do not expect the Nifty to fall below 4,200 in the immediate future. The unlikely possibility of a fall below 4,200 would still not see the Nifty breaking the 4,000 level, as there has been an extremely strong build-up in put OI at the 4,000 level, representing 22.25 per cent of the total put OI.

The OI in the Nifty 4,200 call options decreased by 4.9 lakh shares during the last week to 26.3 lakh shares.