Caution at current levels

FY07 OUTLOOK

Nifty remained very strong and rallied for first two sessions of the week, but it remained largely range bound and choppy during remaining sessions.

It has closed at 3966 with a gain of 95 points for the week. Unwinding of positions in stock futures was seen in FII segment, whereas in index future they continued to take short positions.

Nifty is facing lot of resistance near 4000 levels and a further upside move may be seen only after a strong closing above those levels.

Implied volatility of Nifty January options is currently 22-24 per cent, which is still not very comfortable level and one shall keep a close watch on it. Any increase would indicate that markets may turn volatile again.

Therefore, caution is advised at current levels. Tech stocks Infosys, Satyam and Polaris and also other stocks such as Bank of India, Mahindra & Mahindra and Parsvnath Builders have added remarkable OI during Friday's session with a positive cost of carry.