The Dow Jones Industrial Average rose 121.07 points on Friday on expectations that the US government’s $700-billion rescue package was in the offing.
The SGX CNX Nifty October futures followed the Dow and closed 53 points higher at 4,051 on the Singapore exchange compared with a close of 3,998 on NSE. These factors may augur well for the domestic market, which may open on a positive note on Monday, barring unforeseen developments on Sunday.
However, the domestic equity market ended on a bearish note on Friday, with the spot Nifty closing at 3,985, just above its 61.8 per cent retracement level of 3,973 from the recent rally of 3,799 to 4,292. It enabled the index to break the trading range of 4,000-4,300, signalling a bearish sentiment. The price behaviour also suggests that the market on Friday was more bearish than bullish.
The trading pattern in stock futures suggests that derivatives players are either creating fresh short positions or booking profit, if possible. Of the 260 stock futures, as many as 112 witnessed an unwinding of long positions, while a fresh short build-up was seen in 123 others. The 13 others witnessed a modest long build-up, while remaining 12 did not show any indication.
Among the stock futures, unwinding of long positions was seen in Ashok Leyland, HCL Technologies, Hindalco, Sterlite, State Bank, NTPC, Tata Steel and Wipro. A build-up of fresh shorts was seen in Chambal Fertilisers, ICICI Bank, Ispat Industries, Ranbaxy, Reliance Industries and Reliance Communications. Profit-booking was evident in Sesa Goa and ITC.
Options trading on Friday suggests that the Nifty is more likely to break the 3,800 level than moving above the 4,300 level. Selling in call options contracts between 3,800 and 4,200 strikes with 4,000-4,200 strike calls together added an open interest (OI) of 2.2 million shares. Interestingly, the 3,800 strike put witnessed a sharp increase in OI, mostly through buy contracts, indicating that the 3,800 level is becoming vulnerable.
