The markets recovered sharply from the day’s low levels on hopes that cuts in banks’ lending rates would help credit flow more freely and ease the cash squeeze. Realty, banking and power indices outperformed the market, while technology stocks were weak on account of a lack of interest.
After trading sideways during most part of the day, the Nifty futures moved up sharply in the last one-and-a-half hour of trade on account of short-covering. However, on the F&O segment of NSE, traders were cautious on account of the V-shape recovery in key index heavyweights in the last five trading days. The turnover on the derivatives segment hit a five-month low, with index futures and options witnessing a decline in volumes.
The Bloomberg data show that F&O players were covering their short positions in index futures and key stock futures like Reliance Industries, State Bank of India, Bharti, DLF and HDFC as almost 40-50 per cent of trading volumes changed hands during closing hours of trade. The Nifty November futures gained 3.3 per cent and Reliance was up 5 per cent as almost 40 per cent of volumes on F&O changed hands in the last one hour of trade.
DLF witnessed 55 per cent volume in the last hour of trade as the stock moved up from Rs 255 to Rs 293. State Bank of India gained from Rs 1,271 to Rs 1,332, HDFC was up from Rs 1,828 to Rs 1,937 and Bharti Airtel rose from Rs 672 to Rs 725 on short-covering during closing hours of trade.
The Nifty options data suggest that the index has support at 2,900 and 3,000, while resistance is seen above the 3,200 level. Call writers were seen covering their short positions at 3,200 and 3,300 strike calls, indicating that players expect the index to move up above the 3,200 level.