The global meltdown on Thursday (July 26) gave bears an upper hand on Friday with the Sensex and the S&P Nifty witnessing its fourth biggest fall. Healthy rollover on Thursday with discount of 45 points to the Nifty August futures had indicated short positions.

The Friday fall was on account of global weakness and huge short positions. The Nifty has retraced from higher levels and settled near 4,445. Loss of support at these levels may induce further weakness in the markets.

According to derivatives analyst Zeal Mehta of Emkay Shares, the Friday fall was a correction of the rally witnessed in the past couple of months.

A huge build-up of short positions was seen in the Nifty as the markets fell sharply on Friday. Implied volatility also shot up to 25-26 per cent on Friday compared with 20-22 per cent during the week, indicating that the markets may remain highly volatile in the coming days.

The derivatives players should now maintain appropriate and strict stop-loss on all positions. However, the PCR (OI) of Nifty is at a comfortable levels of 1.42.

Rising concern over a worsening US housing market might hit growth in the US market, and in turn could impact the economy of the countries exporting to the US.