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Nifty likely to remain range-bound

This article was posted on Oct 1, 2009 and is filed under Market Outlook

The Nifty October futures closed above the resistance level of 5,010 on short-covering and buying in banking, metals and capital goods stocks. After a modest start, the Nifty extended gains in the afternoon trade on firm European markets and higher Dow futures.

The market is expected to be range-bound tomorrow. This is because traders may refrain from building long positions as the market is to remain closed on Friday.

According to the Bloomberg data, traders on Wednesday booked profit when the Nifty futures were trading above 5,050. The traders, however, used the morning session to cover their short positions. At least 60 per cent of the total trading volume of 372,730 contracts of 50 shares each, changed hands when the Nifty was trading above 5,050. Since most of these contracts were sell-side trades, the change of hand indicated profit-booking at higher levels.

The Nifty October futures witnessed fresh short build-up as the futures closed at a 10-point discount to the spot and shed 261,000 shares in open interest (OI). This was the second day in a row when the Nifty October futures traded at a discount. Hence it’s possible that traders are building short positions on expectation of a correction.

Call buyers seemed to have booked profits in 5,000-5,200 strike call options as these options shed an OI of 1.65 million shares, mostly through sell-side trades. Traders were seen writing 5,300-5,400 strike calls as they expected the Nifty to face resistance above 5,200.

Profit-booking by put buyers was seen at 4,700 and 4,800 strike puts as they expected the Nifty to stay above 4,800 in the near future. Support levels for the Nifty are seen at 4,900 and 5,000 as the 4,900 put and the 5,000 put have added 0.81 million shares and 1.46 million shares in OI, respectively, mostly through sell-side trade.

source: Business-Standard

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