Market analysts expect a technical rally next week, if the Nifty manages to sustain around 2,700 and close above the 2780-level. F&O participants are anticipating a pullback next week and this was indicated by short positions they covered on the expiry day of the November series and initiated long positions in the Nifty and key stock futures.
Foreign institutional investors (FIIs) were net buyers in the Nifty futures throughout the last week. They squared off short positions on the last day of expiry because their gross open positions in index futures on Friday were at 4.14 lakh contracts, the lowest in the current calendar year on the last day of expiry.
FIIs have also pruned their short positions in stock futures, with the weekly open interest (OI) falling by 2.10 lakh contracts to 8.54 lakh contracts, following the monthly expiry and covering of short positions at lower levels during the entire week.
Options traders were seen buying out-of-the-money call and writing out-of-the-money puts. The 2,800, 2,900 and 3,000 calls of December series contracts added an OI of 7.65 lakh shares, mostly through buy contracts, while 2,400-2,700 puts added an OI of 1.41 million shares through sell contracts as reflected by the order-book positions on NSE.
Buying of 2,800-3,000 calls and selling of 2,400-2,700 puts suggest that the derivatives participants expect the index to move in a wide range of 2,400 to 3,000 with support at 2,400 and resistance at 3,000. However, even if the index manages to move above the 3,000-level, it will face strong resistance at 3,200 as we saw the 3,200 strike call adding an OI of 1.75 million shares on Friday.