The Nifty closed below the important support level of 2,860, indicating a further correction up to the 2,800 level. Options traders were seen buying 2,800 and 2,900 puts and writing the 2,700 put, indicating that the Nifty expected to trade below 2,800 with support seen at the 2,700 level.
Traders were seen writing 2,900-3,000 strikes call and hedging it by buying 2,800 strike call.
However, some traders were seen writing the 2,800 strike call as they expect the index to lose this support level soon. As the Nifty is trading within channel, technical analysts expect that the index may witness a pullback as it is nearing the oversold level on hourly charts. Technically, the 2,800-2,850 levels remain the strong support region for the index.
The market today opened on a positive note, but lost support during the post-noon session on account of selling in heavyweights and sharp correction in the IT, realty and consumer durables stocks. Among heavyweights — Reliance Industries, DLF, ICICI Bank, Infosys Technologies, ONGC and State Bank — declined between 3 and 5 per cent on build-up of short positions.
The Nifty closed below the support level of 2,860 at 2,857. Though the Nifty January futures closed above its crucial support level, its premium to spot declined from 20 points to 6 points. The Nifty January futures added open interest of 2.49 million shares during the intra-day session, but shed all its open interest after the settlement session, indicating unwinding of long positions and fresh build-up of shorts.
Among stock futures, the Reliance's January futures declined by 5 per cent from its intra-day high on build-up of shorts and unwinding of long positions.
Traders were buying 1,200 strike put and writing 1,260 strike call of the stock on expectation that its futures may fall below Rs 1,200 and unlikely to go above Rs 1,260.
Reliance Petroleum was up 5.35 per cent and witnessed long build-up of 2.37 million shares as the company commenced its crude processing unit at Jamnagar.
