Nifty may slump to 4600

The Sensex has fallen 728.71 points since the last expiry, but building of short positions and less-than-confident long players point to further weakness. A technical bounce may be a good time to sell, suggest experts.

On a marketwide basis, rollovers stood at 83.8%, while 76.2% of Nifty contracts were rolled over to the November series. “Strong rollovers were witnessed, but the low roll cost clearly indicates lack of conviction among long players. Shorts on the other hand are very aggressive. Nifty may show a technical bounce back but is likely to go down to 4680 or even 4580 levels,” said Yogesh Radke, manager at Edelweiss Securities.

The market has been under pressure with the RBI raising the statutory liquidity ratio for banks, signalling the end of an easy monetary policy. The Sensex reacted by closing with a 387.10-point loss on Wednesday. Mixed results and expiry saw the benchmark index decline 230.77 points to close at 16052.72 on Thursday, an eight-week low. The Nifty closed at 4750.55.

Analysts said that over last few days cash-based selling has been seen on the back of weak global cues, accompanied by formation of short positions in index and large-cap stocks.

Cash-based selling has seen Nifty futures trading at a premium of 24 points to the spot index.

“Position wise it seems we are oversold, but price wise we are not yet oversold. At this time 4600-4650 range seems to be strong support for markets,” said Siddharth Bhamre, head, investment advisory and derivatives, Angel Broking.

There might be a pullback of 150-200 points on the Nifty from here as markets have corrected substantially from their highs, but this would only be a good opportunity to unload, feels Sandeep Singhal, co-head, institutional equity derivatives, Emkay Global Financial Services.

“Any pull back rally from hereon should be used to sell. We are advising our clients to sell auto, banking and realty stocks once markets pull back to 4850-4900, which appears to be near term resistance,” he said.

Downside may not extend beyond the 4600 mark and experts perceive limited movement from there. “The market is likely to stabilise in the range of 4600-4800 before the next expiry,” said Sailav Kaji, head, derivatives, Pinc Research.