The Nifty July futures traded around 4032 through most of the day, before closing at 3978. The futures discount widened to 60 points an hour before close.
The widening discount and rise in open interest indicated a build-up in short positions. Data culled from Bloomberg showed that almost 25 per cent of the trading in Nifty futures took place when the benchmark slid from 4100 to 4010 in the last trading hour. The open interest at close of trading was up by 10 per cent or 3.68 million shares.
But only 322,750 shares were carried forward due to the squaring of intra-day positions post the close-out. This clearly shows unwinding of long positions.
The Nifty has a series of technical supports within the 3750-3850 band. These could be tested in the near term, going by recent trading patterns, leading to a bottom confirmation.
The index has a strong support at 3700-3900 levels, with the Nifty put open interest at 3700, 3800 and 3900 strike prices accounting for almost 80 per cent of the total put open interest.
Positional traders are, however, covering their 4000 and 4200 calls, on expectations of a bounceback after the bottom formation.
