F&O Manual | Whiff of fatigue in Nifty rally keeps traders wait for shorting opportunity

Manappuram Finance continued to rise, and thus bullish traders added to their positions.

The market kept up the momentum and indices traded in the green for another day on April 11. The Nifty added 113 points as of 10am to 17,737 on the back of buying in realty and PSU bank stocks.

As the index moved higher, lower strikes saw Call unwinding but some traders got the whiff of a fatigue setting in for the benchmark index. They are now waiting on the sidelines for shorting opportunities.

The bars reflect a change in open interest (OI) during the day. The red show call option OI and the green put option OI.

“The zone between 17,500 and 18,000 is the supply zone for the Nifty,” said Santosh Pasi, a derivatives trader and an investment advisor. “At 17,800 calls, there is maxpain level and thus present a shorting opportunity for traders.”

On the options front, 17,700 saw the largest accumulation of Put as it emerged as support for Nifty for the day. Call writers unwound their positions at 18,000, which Pasi termed as liquidation unwinding. On other strikes, limited Call writing was seen.

Among individual stocks, Kotak Mahindra Bank was the apple of trader’s eye with holding by foreign investors shrinking to 41.22 percent that could result in a wider foreign headroom opening up and the stock gaining weightage in the MSCI index.

Manappuram Finance continued to rise, and thus bullish traders added to their positions. Bank of Baroda, Indiabulls Housing Finance and Canara Bank were in the limelight as well.

Some short-covering was also seen in SB, ICICI Bank and JSW Steel that gained in trade during the day. Short-covering is a positive sign and is a signal that the stock may be bottoming out.

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