MUMBAI: Huge build up of shorts in index and stock futures supported with large put buying at immediate levels indicate the market is in a tight bear grip and may see sharper falls from current levels. Foreign players have net sold in cash and futures segment and have built fresh short positions in the Nifty March futures. Traders have also bought 2,500 and 2,600 put options heavily. “Nifty has crucial support at 2,650 levels. If Nifty respects this level, then we may see some recovery up to 2,750-2,795. But if the index support breaks, then panic selling may be seen. On a daily basis trend, the deciding level is 2650,” said Samir Kaushik, technical analyst at Global One Wealth Management. “If Nifty shows strength above 2,650 with good volumes then we may see a rally up to 2,695-2,710 and 2,750. On the other hand, if Nifty doesn’t sustain above 2,650, then we may see a decline to 2,550-2,525 levels,” Kaushik added further. On the options front, call buying was observed at 2700 strike while huge call writing was seen at 2800 levels indicating very limited upside in case of any revival in market sentiments. On the other hand, unwinding of written puts was seen at 2700 strike and huge call buying witnessed from 2600 to 2400 levels suggesting more downside on cards. The 2,600 put options added an open interest of 14.88 lakh shares and 2,500 put options added 18.3 lakh shares. These positions together account for nearly 40 per cent of the total open interest in put options. This indicates that the traders expect Nifty to trade below 2,500 levels in the near term. We have also seen huge build up of positions at March 2200 put (50.77 lakh shares). “A similar pattern has been observed which happened when the marker collapsed from 4800 to 3800 levels. We saw a huge amount of put trades at 4000. In current scenario huge build up of positions were seen in March 2200 Nifty put contract. Hence I expect if sentiments don’t change in the near future, Nifty may drift lower to 2000 levels,” said Aditya Bhargava, derivatives analyst at Flexion Capital Advisory. Intraday, Nifty March futures added an open interest of 33.27 lakh shares and carried forward 1.5 lakh shares at the close of the day’s trade, indicating fresh short build-up and unwinding of long positions at higher levels. Nifty futures price slumped 3.51 per cent while it added 1.5 lakh shares with cost of carry increased to -20.15 per cent. “The Dow broke the short-term support at 7100, respecting the new resistance level at 7500 and confirming the primary down-swing with a target of 6000. The Sensex continues in a long and narrow consolidation – testing support at 8500 levels. The primary trend is down and any close below 8500 would offer a target of 7000 in near term,” said Jonathan Paul of Krug and Bordman Advisory. Meanwhile, stocks fell worldwide, sending the Dow Jones Industrial Average below 7,000 for the first time since 1997, and Treasuries rose after American International Group reported a $61.7 billion loss.

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