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Nifty continued its downward journey for the sixth day in the row  - HDFC Securities 

F&O HIGHLIGHTS

LONG UNWINDING WAS SEEN IN THE NIFTY & BANK NIFTY FUTURES

USE PULL BACK RALLY TO REDUCE LONG POSITIONS; SUPPORT SEEN AROUND 13500

* Nifty continued its downward journey for the sixth day in the row where it plunged by 183 points to close at 13635 levels.

* Long unwinding was seen in Nifty Futures’ where Open Interest fell by 3% with Nifty falling by 1.32%.

* On the other hand, Short covering was seen in the Bank Nifty Futures, where we have seen 2% fall in the Open Interest with Bank Nifty rising by 0.7%.

* Nifty Open Interest Put Call Ratio fell sharply to 0.98 levels from 1.34 levels. Amongst the Nifty options (04-Feb Expiry), Call writing was seen at 13800-13900 levels, Indicating 13800-13900 level will act as a resistance. On the lower side, support is seen in the vicinity of 13500-13600 levels where we have seen Put writing.

* Long unwinding was seen by FIIS’ in the Index Futures segment where they net sold worth Rs 5 Cr with their Open Interest going down by 6990 contracts.

To Sum It Up, Long unwinding in the Nifty Futures, sharp fall in the Nifty Open Interest Put Call ratio on the back of Call writing at 13800-13900 levels and FIIs’ large selling in the cash markets Indicates that one should continue to remain bearish for the markets However considering the sharp fall during the last six days and strong Asian markets, possibility of pull back rally should not be ruled out.

Therefore, our advise is to remain cautious and use any pull back rally towards 13800-13900 to prune long positions. On the lower side 13500-13600 level will act as an immediate support where Puts have been written

In the Bank Nifty, where we have seen long build up, our advice is to be bullish with the stop loss of 30000 levels. On the higher side, resistance is seen in the vicinity of 31000-31200 levels.

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