Profit-booking likely

F&O Outlook

The S&P CNX Nifty and the Sensex have now inched higher into uncharted territory, supported by large volume throughout the last week.

The put/call ratio (PCR) of Nifty open interest surged by 0.11 points to 1.63 as open interest of 54.20 lakh shares (+25.64 per cent) was added in Nifty put options and 24.30 lakh shares (+17.48 per cent) in Nifty call options.

The Nifty total open interest has increased by 36.34 lakh shares (+10.35 per cent) to 387.68 lakh. Nifty July futures traded at a discount of 16 as against yesterday's 2, with futures open interest increasing by 0.68 million to 38.76 million shares. 
 

ON A HIGH Stocks futures with OI increase
	OI in '000 shares		July Futures price
	Jul-13	chg*	Jul-13	% chg*
GMR Infra	7909.00	1331.00	915.90	22.44
Bank of India	4995.00	517.00	267.60	19.76
SAIL	35008.00	5370.00	156.10	19.62
Lanco Infra	3763.00	1098.00	249.00	18.04
CESC	1115.00	307.00	457.35	17.96
* Weekly gain in futures prices

These indicators point out that the markets are likely to have entered the overbought zone and that can lead to profit-booking. Nifty PCR (open interest) rising to 1.63 is still not showing signs of overbought positions, says Zeal Mehta, derivative analysts at Emkay Shares.

He expects further upside in the Nifty, but one should keep a close watch on the PCR from current levels. Henceforth, investors should trade with strict stop-losses.

Markets continue to maintain positive view on Nifty for the coming days. It closed at an all-time high on Friday as it bounced back sharply during the week after taking support close to expected levels of 4350-4300.

The implied volatility of Nifty has declined to 17-18 per cent compared with 21-23 per cent earlier during the July series.

This indicates smart improvement in sentiment and, hence the market is likely to sustain at the current levels. The strong support is seen in the range of 4350-4300, and for immediate term, the support exists close to 4400 levels.