F&O Manual | Slight profit-booking kicks in, but sentiment for Nifty stays positive

The Nifty 50 snapped its 5-day winning streak on December 29.

The benchmark Nifty 50 recorded a marginal dip as some investors chose to reap benefits of the recent bull run on December 29, the last trading day of 2023. Analysts see this slight decline as a healthy move as the index had slipped into the overbought condition after a stellar run through the month.

The Nifty 50 has surged 8.5 percent in the past month which gave investors more leeway to take home partial profits. At 12.30pm,  the Nifty was down 34.70 points or 0.16 percent to 21,744.00. About 1,749 shares rose, 1,448 fell, and 84 traded unchanged.

The bars in green represent the change in the put open interest (OI) and the red the change in OI for call options.

On the options front, call writers turned heavily active at 21,800, 21,850 and 21,900 strikes, suggesting pressure on the headline index as it attempted to move higher. However, put writers remained strong at 21,750 and 21,700 strikes which is likely to cushion the Nifty 50 from a steeper fall.

Given that the strong rally in recent weeks had pushed the index into an overbought zone, analysts at ICICI Securities anticipate that the Nifty may undergo some consolidation in the coming sessions in the range of 21,100-21,600 amid stock-specific actions.

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Sameet Chavan, technical analyst at Angel One, believes that market sentiment remains buoyant, considering the recent developments. However, looking at the overbought parameters, he advises investors to avoid aggressive long bets and maintain a pragmatic approach.

Among individual stocks, Tata Motors saw a sharp 10.3 percent jump in open interest as traders aggressively added long positions in the counter. The bullish momentum on the derivatives front also reflected in the cash market as the stock became the first in the Nifty 50 league to double in 2023.

Stocks like Vodafone Idea, Ashok Leyland, and Tata Consumer also saw long additions. On the other hand, ONGC, SBI, Infosys and Dr Reddy's Labs saw an increase in short buildup.

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