Uncertainty dogs market

F&O OUTLOOK

Monday's hourly chart indicates a continuation of Friday's trend tomorrow. However, the trend is confirmed only if after the day's low of 4402.70 is breached tomorrow. The markets on Monday witnessed range-bound trading "" bullish in the first half and bearish in the second half.

This indicates a sideway trading, and perhaps indecision. The flip side of Monday's trading was the holding of the Nifty support of 4398.05. This perhaps gives some hope of a technical bounceback tomorrow as long as markets do not touch a new low.

The open interest in the Nifty August series increased by 28.82 lakh shares to 436.43 lakh shares. The rise in the Nifty open interest and a corresponding correction from the day's high indicates that short positions have been built by operators. The advance-decline ratio on the BSE was positive at 1321:1284.

The NSE saw an advance-deposit ratio of 516:580. The put/call ratio of the Nifty open interest remained unchanged at 1.44.

The immediate support for the Nifty stays at 4398-4356 while resistance is at 4487-4535. The trend-line support is at the 50-day moving average of 4354, which is also a 20 day-swing low.

The open interest in the Nifty put and call options suggest that support exists at 4400, while resistance is at 4500 levels.

Though 4500 put holds the maximum open interest, there was no activity at this option over the last few days, and hence it is difficult to predict 4500 as the support base for Nifty in the near future.

The weakness in global equity markets, sparked off by concerns on defaults in the sub-prime market, triggered off a widespread correction in the Indian markets with the BSE Sensex falling 3.4 per cent on Friday. Global markets continued to remain weak, will impact Indian equities as well.

The open interest built up in the stocks and index futures at Rs 59,535 crore in the first two trading days of the new August series contracts compared to Rs 49,900 in the first two trading days of July series contracts also suggests that a reversal in sentiment could result in a relatively sharp correction.