The benchmark indices fell around 3 per cent each on unwinding of long positions in the Futures & Options (F&O) segment as investors expected fresh corrections. In the F&O segment, fresh short build-up was seen in Reliance Industries, ICICI Bank, State Bank of India, Unitech, DLF and Tata Steel.
The Nifty broke the most crucial support of 4,100 and closed at 4,078, indicating that fresh decline is possible in the next couple of sessions. The Nifty July futures witnessed unwinding of long positions by around 2 million shares. However, bears created fresh short positions as open interest (OI) in July futures increased by around 460,000 shares.
Options traders expect the Nifty to get support at 3,700 if the 4,050 level is broken. Traders were seen buying the 4,000 strike call and put on expectation that the index will see a sharp rise or fall on either side of the breakout at the 4,050 level.
S&P expressed concern about India's rising fiscal deficit, which was pegged at 6.8% by finance minister Pranab Mukherjee in his budget speech. "Any delay in fiscal consolidation could negatively impact the country's rating," S&P said, indicating that the government needs to spell out its plans to reduce the fiscal deficit -- the difference between the government's income and expenditure.
-JK, Senior Technical Analyst
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