The Nifty today posted its biggest rise in three months as hopes of a recovery in the battered US banking system boosted investor sentiments across the world.
The 50-share index crossed the 2,660-mark and closed above 2,700, while Nifty Futures also closed at a premium to the spot for the first time in three months.
The market is expected to open on a firm note on Monday as the most-traded stock futures –Reliance Industries (RIL), ICICI Bank, State Bank of India (SBI), DLF, Infosys Technologies, HDFC Bank, Tata Steel and Larsen & Toubro – closed near their intraday highs on Friday. This is taken as a bullish sign for the market to retain its upward momentum.
A significant unwinding of short positions was seen at 2,600 and 2,700 in call options as the open interest (OI) in these options declined by 2.57 million shares despite a strong volume of 22.83 million shares.
Put writing was seen in 2,600 (OI up 1.51 million shares) and 2,700 (OI up 1.12 million shares) options as F&O traders expected the current bear market pullback to continue at least for the short term.
But the current pullback is a typical bear market rally. So, it is expected to fizzle out at around 2,750-2,800 levels, according to market experts.
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Even in the present rally, FIIs are continuing to sell, and this is putting pressure on any possible recovery. However, the Nifty’s Friday close of 2,719.25 will be taken as a major achievement for bulls.
The Nifty March futures shed an OI of 1.65 million shares at settlement and closed with a modest discount, indicating that traders have covered their short positions.
The Nifty April futures continue to add fresh OI but at a discount to the March futures, indicating that F&O traders have taken a bearish view of the markets as they expect that no political alliance would be able to garner a majority in the upcoming general elections.