Markets may see further fall

F&O OUTLOOK

Amidst weak global cues, the market panicked on Friday and broke all support levels. The bull run had started when the Nifty was at 5,677. It came back to that level on Friday after touching a high of 6,388. If the downturn continues next week, the price projection for the Nifty is 4,527, according to Fibonacci.

Fibonacci retracement is a popular tool used by many technical traders to help identify strategic places for transactions to be placed, target prices or stop losses.

The Fibonacci retracement tool is favoured by many traders because of its abilty to identify a price level that a correction may reach before it is able to reverse and continue in the direction of the original trend.

A section of market analysts, though, are predicting a recovery. Friday's sell-off was on account of mark-to-margins payments, which got triggered because of a delay in getting payments through real time gross settlement services (RTGS). There were certain technical problems, which impacted the working of RTGS at banks, RBI officials said. 
 

TRADING AT DISCOUNT
	Jan 18, 2008		% chg*
	Future Price	Spot Price
Idea Cellular	130.85	136.05	-3.82
AIA Engg	1472.25	1530.00	-3.77
VSNL	623.90	641.04	-2.67
Tulip IT Serv	913.65	935.95	-2.38
Federal Bank	328.05	335.25	-2.15
Patel Engg	883.70	897.15	-1.50
Havells India	640.20	648.85	-1.33
Nucleus Soft	311.75	315.14	-1.08
Nat'l Alum	433.05	437.55	-1.03
Rolta	683.15	688.80	-0.82
* Over Spot Price

According to Anand Kuchelan, derivative analyst at PINC Research, the market witnessed large-scale profit booking which triggered a further fall in prices. The F& O players were asked to pay mark-to-market margins and those who could not provide margins sold their outstanding positions.

The fall saw the outstanding positions of 115 stocks futures declining on account of a 5 to 10 per cent fall in prices in the last one week. The fresh short positions of over one lakh shares each was seen in 62 stocks futures while only 10 stock futures witnessed short covering.

The sharp decline in prices saw stocks futures trading at huge discounts and that led to further selling. This put most of the stock futures in deeper discounts with the cost of carry for as many as 54 stocks futures turning negative.

The Nifty January futures contracts have witnessed huge short positions of around five million shares, which is being uncovered despite a 351 points fall in the Nifty between December 28 and January 18, 2008.

The daily F&O trading data had earlier provided clues that the market is heading for a steep fall. The average traded price of Nifty futures in the last five trading days remained two per cent above the closing levels, indicating a carry forward of short covering. In normal situations, players cover their intra-day short positions if the average price is higher than the closing levels.

The Nifty PCR dropped to 1.05 levels from 1.11 due to the addition of 10.51 lakh share in call option against an addition of 1.26 lakh in the Put option. The five days relative strength index (RSI) is at 9 while the PCR is inching below 100 indicating the oversold positions.