The Nifty’s rebound from the day’s low of 3,920 to close at 4,072 is expected to continue with an upside limit of 4,200-4,300. However, the upmove largely depends on global cues, with the SGX Nifty trading at 4,042 against the index’s spot close of 4,072.
The activity in options contracts, however, suggest a rebound as traders were buying call options and covering put options of 4,100-4,300 strikes. The 4,000 and 3,900 levels are likely to act as support as the open interest (OI) in these strikes has increased sharply by 2.31 million shares through the writing of put options.
The 4,100-4,300 strike calls added an OI of 3.78 million shares, while 4,100-4,300 strike puts witnessed a decline in the OI by 2.33 million shares. The purchase of calls and covering of puts at 4,100-4,300 strikes suggest that derivatives traders expects the Nifty to move above the current level with an upside limit of 4,300.
The Nifty September futures closed on Tuesday at 4,098, a 24-point premium against a discount of four points yesterday. The September futures witnessed a sharp rise in trading volumes above the 4,000 level and the Bloomberg data indicate that 36 per cent of the trades were done at an average of 4,055, mostly through buy orders in the last two hours of the trading session. The closing trade data on NSE show a decline in OI by 1.13 million shares, which indicates a short-covering Nifty futures.
Earlier during the day, Reliance Industries, State Bank of India, HDFC Bank and Punjab National Bank witnessed short-covering at lower levels. Reliance Industries moved up 6.49 per cent, State Bank of India went up 11.6 per cent, while HDFC Bank rose 9.38 per cent from the day’s low levels. ICICI witnessed a build-up of shorts as OI rose by 2.73 million shares. while the stock declined by 5.2 per cent.