Markets extended losses on anticipated lines. The Week started on disappointing note and trading through the week was mixed with markets closing in 'red' on three out of five sessions. On weekly basis, Nifty fell by 116 points and closed 2.11% lower at 5395.75. Sensex over the week fell by 388 points and closed 2.11% lower at 18008.15.
In F&O, Overall 'Open interest' rose by Rs.22,305 cr. to Rs.1,31,722 cr. over the week. OI in Stock futures, in quantity terms went up by almost 4% to 185.46 cr shares over the week (Spot Nifty during the week witnessed 2.11% fall).
This is suggestive of build-up of 'Short' positions in stock future segment. This trend was also observed in Auto, Constructions, Infra, FMCG, Power and Telecom segment.
Volatility Index (India VIX) sharply 'rose' by 8.10% to 24.41 from 22.58 in the previous week. Nifty OI PCR (Put-Call ratio) slipped to 1.11 from 1.31 levels over the week. This drop in Nifty OI PCR is largely due to the significant addition in 'CALL' OI (around 5300, 5400 and 5500 strikes in February Series). Over the week, Nifty PUT February Series added 16% in OI to 4.04 Cr shares, whereas Nifty CALL February OI 'swelled' by 60% and reach to 4.41 Cr shares.
In fact, the week could have ended much better if it wasn't for Friday's ferocious fall. Before Friday, the market was evenly poised and it looked like we were in for a small rebound after the recent mayhem. But a massive sell-off on Friday dented all the hopes.
Next week will begin with a bitter aftertaste of Friday's sell-off. The sentiment has taken a beating and will take time to heal. What perhaps could perk up the mood is the fact that both FIIs and DIIs were net buyers in Friday's session. So, who and what led to the sharp sell-off?
The positive institutional buying is encouraging but one has to see whether this trend sustains for long. Technically, 5350 is a crucial level and the Nifty is likely to rebound from there. On the flip side, a break below 5350 might hit the sentiment further.
Next week is light on global data points while our markets will have to grapple with advance GDP estimates for FY11 (Monday) and the latest IIP numbers (Friday). We are going through tough times after a two-year rally. This is a healthy correction and should be used to pick up quality stocks for medium to long term investment. The near-term prospects will hinge on how the Government tackles some of the macro-economic headwinds.
Note: Finance Minister Pranab Mukherjee said steps have been taken to tame inflation but the Government has no magic lamp to bring it down immediately. "You cannot expect that there is any magic wand or like Alladin's magic lamp that you rub it and your problem is solved," Mukherjee told reporters. He said the Reserve Bank has taken steps, including tightening of the monetary policy, to control inflation. Will it bring some effect on "BUDGET"?
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