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Unwinding of long calls at 3500; Nifty support 3400

This article was posted on Apr 24, 2009 and is filed under Market Outlook

MUMBAI: The formation of bull-put spread, which hinted at moderate bullish sentiments among investors, was clearly visible from the index movement Friday.

Indian markets advanced for the consecutive second day and seventh week straight as traders covered their short positions and bought moderately in the spot segment.

Nifty April futures provisionally ended at a discount of 5 points, against a premium of 2 points on Thursday. The futures price rose 1.43 per cent and added 13.36 lakh shares (provisional) in open interest. The cost of carry was negative 10.06 per cent, suggesting moderate build up of short positions in the contract.

On the other hand, Nifty May futures provisionally closed at a wide premium of 11 points to the spot. Buy quantity was thrice that of sell, indicating build up of long positions. Even the calendar spread suggests rollover of long positions in the contract.

Unwinding of long call was observed at Nifty 3500. Call writing was seen at 3600 strike while unwinding of short calls was seen at 3300 strike. This suggests Nifty may face resistance in 3500-3600 zone. On the other hand, huge put writing was observed at 3400 while unwinding of long puts witnessed at 3300 level. The options data hints at a range of 3400-3525 for the near term.

“Though Indian markets have so far rallied astonishingly, they are currently trading at overbought levels and hence we are booking profits at every rise and are holding cash to enter at lower levels. But if global markets demonstrate positive cues on Monday, I expect Nifty to move past 3500 giving a positive breakout on higher side. Till such time Nifty breaches 3500 on closing basis, I will advise players to remain light in the markets,” said Samit Patil, analyst at Connoisseur Wealth Advisory.

Among stock futures, Reliance Industries rose 1.15 per cent and shed 16.20 lakh shares in open interest. ICICI Bank advanced 2.11 per cent and OI shed 39200 shares. State Bank of India climbed 3.46 per cent while Tata Steel slipped 0.93 per cent as players unwound long positions in the stock.

DLF gained 2.22 per cent while OI shed 35.34 lakh shares. JP Associates jumped 5.87 per cent. Bharti Airtel advanced 5.78 per cent and Maruti Suzuki rose 1.16 per cent.

In spot, the 50-share Nifty closed the day 1.67 per cent higher at 3480.75. Intraday, it touched a low of 3402.90 and high of 3491.35, a band of 89 points. The top gainers were M&M (6.09%), Bharti Airtel (5.91%), Grasim (5.82%) and Axis Bank (5.49%).

Total F&O turnover on NSE was Rs 68374 crore against Rs 68331 crore on Thursday.

Meanwhile, stock markets recovered strongly in Europe as data showed business confidence rebounding from record lows in Germany.

source: Economictimes

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