The FIIs were net sellers in Nifty futures, but hold 60 per cent open interest in index futures. The Nifty May futures premium reduced to six points from 18 points last week, while the open interest increased by 6.3 per cent on a 4.9 per cent decline in Nifty futures.
There was a built-up in short positions in almost 45 per cent of the stock futures, while another 45 per cent futures witnessed profit booking.
The expected selling may drag the index to its short-term support level of 4940. If the Nifty breaks this level, the bias would turn downwards and the Nifty could slip to 4700 in the short term.
The Nifty has moved further below the 200-DMA (daily moving average) of 5179 and is heading towards the 50-DMA of 4920. The 200-DMA is a strong long-term average and a violation of the same suggests the possibility of a steep fall in the market.
According to technical analyst Kamalesh Langote, the rally from 4480 to 5300 could have developed a flag pattern which is bearish. The moving average on the daily chart has given a sell signal, which indicates caution.
The volumes in the options segment remained weak as the Nifty May PCR declined from 1.20 to 1.14. This indicates close-out of put options and fresh built-up in call options. Call writing and put buying was seen at the strike price of 5200, which shows that Nifty's up-move is clipped at the 5200 level.
