Nifty seen lower, support at 2750-2775

A gap-down opening for the Indian stocks is likely on Tuesday given the weak Asian markets and the Singapore Nifty trading lower by 57
points. Foreign players selling in futures and spot market is also a matter of concern. Analysts are advising investors to stay light with strict stop losses.

After a volatile session of trade Monday, National Stock Exchange's 50-share Nifty ended 0.63 per cent up at 2846 levels while January futures settled at a stagnant discount of 13 points to spot. Nifty January futures were trading in the range of 17-21 points discount to spot throughout the session and closed the day at 2,833, a 13-point discount to spot.

The open interest in January futures declined by 469,650 shares due to unwinding of long positions at higher levels. The Nifty February futures closed at 2,836 and added 14.3 lakh shares indicating rollover of long positions.

The Nifty moved in a narrow range of a mere 48 points Monday. The range contraction tells us that the market participants are confused. They are not sure of the direction in which the index is likely to move in the next few days. Now, this indecision has to end sooner or later. Therefore, a range contraction is an indication of a big move to come.

The narrow range also gives a trading opportunity. The high and low of the range act as resistance (high) and support (low). If the Nifty moves above the high of 2869, there is a buying opportunity, below the low of 2819, there is a selling opportunity.

Options build up sketches a hazy picture. Significant amount of call writing was seen at 2900 and 2800 call while, call buying was observed at 3000 strike suggesting a hedge against any abrupt upside. On the downside, unwinding of short calls was observed at 2900 strike. However, huge build up was seen at 2800 and 2700 put.

The options data gives a resistance for Nifty at 2900 while support at 2700-2750 zone for intraday trading. The mid-long term support is intact at 2600-2500 levels.

Foreign players net sold Rs 212 crore in futures and options to the tune of Rs 250 crore. The F&O turnover of Rs 26000 crore on Monday was the second lowest in the month of January.

Meanwhile, stocks slumped in Asia led by commodity producers and banks, after Royal Bank of Scotland forecast of the biggest loss in UK corporate history which heightened concern the global recession is deepening.