The markets recovered from a weak opening and ended in the green, following the build-up of long positions at lower levels. The Sensex ended at 14,657 (up 302 points) and the Nifty closed at 4,414 (up 81 points). Both the indices have closed above their 40-days moving averages (DMA), which is a bullish sign. The 40-DMA for the Nifty and Sensex is 4250 and 14,250 respectively.
The Nifty August futures traded at a premium of 15-20 points during most of the session before closing 20 points higher. And the open interest increased by 1.99 million shares. Although the futures touched an intra-day low of 4252, a total of 30.24 million shares were traded at an average price of 4358.
There was buying in out-of-the-money (OTM) calls and in the money (ITM) puts and profit booking in at-the-money calls (ATM). The trading volumes in OTM call options at the strike prices of 4500-5100 were almost 12 per cent of the total volumes of Rs 48,000 crore on the NSE.
Major call buying took place in Nifty August call options at the 4500 and 4600 strike prices. The 4500 August call options added OI of 12,221 contracts and the 4600 calls added OI of 7,400 contracts. Options players expect a strong upsurge in market, going by huge buying of OTM calls on the first day of the new contract series.
Foreign investors have taken long positions in index futures in the last couple of days and reduced their short positions when the Nifty hit a 15-month low of 3790 last month. This also augurs well for the market.