The Nifty is expected to open above 6,050 on Monday on positive global cues, a strong close for the SGX Nifty at 6,066 on the over-the-counter facility of the Singapore Exchange as well as short-covering from foreign institutional investors (FIIs) in the derivatives segment.
The Nifty futures closed on a high note on Friday on account of short-covering from bears and a strong rally in such key index stocks as Reliance Industries, DLF, Hindustan Unilever, ITC and ICICI Bank.
The volume-driven surge and short-covering at higher levels is expected to take the index to around 6,100 next week. The build-up of two million shares in open interest (OI) in the Nifty October futures augur well for the market and it is expected that both BSE Sensex and S&P CNX Nifty may hit new all-time highs in the October series. The time-price opportunities (TPO) data indicates that the Nifty is expected to get support at 5,980.
A weekly market picture displaying distribution of time and volume at various price levels shows multiple Point-of-Control (PoC) areas, indicating that bulls were in command last week with short-covering from bears at every possible price level. Significantly, low TPOs and volume – at around 55 per cent in the value area (5,978-6,022), and 44 per cent of TPOs and volume above the 6,022 levels – also suggest that bears covered their short positions even at higher levels. The trading pattern in put and call options suggest that the Nifty is unlikely to slip below 6,000 in the near future.
Participants added 2.07 million shares in OI on Friday in the 6,000-strike put and shed 500,000 shares in the 6,000-strike call options on expectations of a fresh upside in the Nifty. The 6,100-strike put added 1.39 million shares, mostly through buy-side trades, which were meant to hedge long positions in the Nifty futures.
The build-up of OI in the Nifty October futures and the strong buy-side build-up in the 6,100- and 6,200-strike call options of the same series hint at a strong bull market in October. The short build-up in 6,000- and 6,100-strike puts of the same series also indicate new all-time highs for the Nifty before Diwali.
Among stocks futures, Hindustan Unilever, ITC Unitech, IDFC, State Bank of India and Reliance Industries look strong on the weekly market picture chart. Both TPO and volume data signal a price level of '340 for HUL and '3,225 for SBI.