8000 a key support level for Nifty, but market still edgy

Sell-off in global equity markets, fall in the rupee and global growth concerns post weakening of crude oil prices triggered selling in domestic equity markets.The Nifty futures lost 151 points for the day and have seen a fall of 490 points, or 5.69%, in the last eight sessions.

Nifty futures continue to see build-up of short positions, with open interest increasing from 2.54 crore to 2.60 crore on Tuesday. FIIs were net sellers in index futures worth Rs 557 crore, with a drop in open interest, indicating long unwinding. They have started building up short positions, but continue to hold long positions, which could pressure the market if index falls further.

INDIAVIX has seen a sharp spike and closed at 16.31, a 2-month high for the index. A further rise from the current levels will lead to more selling in the market as it has negative correlation with the Nifty.

On the options front, the put call ratio open interest (PCR OI) decreased to 0.85 levels on Tuesday from 0.89 levels as shorting of call options is seen. The maximum open interest concentration for the put option is seen at 8000 strike price with a base of 64 lakh, which will act as support for the market. For the call option, maximum OI is seen at 8500 strike price with 60 lakh, but 8300 strike price has significant open interest with 53 lakh and can act as resistance on the upside.

FIIs were net sellers in index options on Tuesday to the tune of Rs 33 crore, but saw huge open interest addition. They were buyers in put options and writers in call options, but also shorted put options. Thus, market will remain under pressure, with 8000 level as key support; breaking below this level, a fall will be actuated further as no build up is seen in lower strike prices.