More downside expected

F&O OUTLOOK

Aday after the technical bounce-back, the markets have registered its second biggest fall on Wednesday with the BSE Sensex declining by 615 points to close below 15,000.

The S&P Nifty closed at 4345, which was the low levels for five days, 10-day and 20-day moving averages. The fall in the market was accompanied by a surge in turnover on the BSE and NSE. As per market talks, the fall has triggered margin calls, leading to more selling.

On Wednesday, the market opened with a gap making a big down bar. This indicates more downside in the near future. The 4,300 level of Nifty, which was the previous peak, is expected to be the support level.

The Fibonacci price projections indicate Nifty's 61.8 per cent retracement at 4,301 levels. Technical support is at 4279 and resistance at 4472 levels.

The Nifty finds support at around 4300-4290 level and the next significant support would be around 4150 level. On the resistance front, the Nifty faces resistance at around 4525-4550 level. Technically, as long as the Nifty trades below this resistance level, the trend can be assumed to be weak.

A strong bearish candlestick near the lower end has bearish implications and it indicates that there is substantial profit booking and short selling emerging in the market.

The Nifty August futures added open interest of 78.91 lakh shares, taking the total open interest to 482 lakh shares. The increase in the open interest and a 183-point decline in the Nifty indicate short positions.

The put/call ratio of Nifty open interest declined to 1.29 from 1.45 as 13.21 lakh open interest was added in put and 27.44 lakh open interest was added in the call options. The decline in PCR also indicates creation of short positions.