The Nifty is expected to be rangebound, with a support at 3980 and resistance at 4150 on a closing basis. If the Nifty closes below 3980, it may test 3700-3600 levels, while a close above 4150 could propel the index to 4400.
Technical patterns indicate positive momentum in the early part of the week. However, sustainability is an issue. The FIIs are likely to take fresh short positions at higher levels and cover them at lower levels.
In the last week, the FIIs were net sellers in index futures when the Nifty traded above 4000 and covered their shorts when the index fell below 3850.
There may be price-wise volatility next week as the FIIs were net buyers of stock futures in the last five trading days. Their outstanding positions rose by 95,000 contracts during the week. The foreign institutions build long positions in capital goods, power, technology and oil and gas sectors, while going short in automobiles, cement, steel, telecom and banking sectors.
In the capital goods segment, BHEL and Siemens witnessed a build-up in long positions. These stock futures gained by over six per cent accompanied by a rise in the open interest.
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Among the technology stocks, Infosys Technologies and Satyam Computers witnessed a long build-up, while TCS and Wipro saw a build-up in short positions. BHEL, Siemens, Infosys and Satyam may therefore witness a positive opening, while TCS and Wipro are likely to correct further next week.
Among other stock futures, Suzlon Energy, Steel Authority of India, Reliance Energy, Cairn India and Idea Cellular witnessed a sizeable build-up in short positions accompanied by a correction of over 10 per cent each. We may thus see a further price correction in these stock futures next week.