Key benchmark indices surged in late trade on firm global cues and buying in auto, metal and realty stocks. The Instanex FIIs index indicated that foreign investors were buying Reliance Industries, BHEL, ICICI Bank and State Bank of India.
However, the market is trading at strong-resistance levels and so we may see profit-booking at higher levels. The Nifty may not go down significantly but any upside from the current level is also limited.
Siddhartha Bhamre, derivative and equity analyst at Angel Broking, expects heavy profit-booking at higher levels, although there is no sign of an immediate correction.
Implied volatility has come down significantly and hence operators are buying 4,700-4,800 calls in anticipation of a fresh rally. However, there are chances of increase in volatility in a few days as the market is trading at a resistance level, says Bhamre.
Nifty August futures were traded at a premium to the spot all through the day and built open interest of 1.55 million shares, mostly from sellers. The futures closed at 18 points premium to the spot and added open interest of 589,200 shares, indicating profit-booking at higher levels. The intra-day trade data from Bloomberg suggest that almost 65 per cent trades, accounting for almost 25 per cent of trading volume, were from sellers, indicating creation of short positions.
The 4,600-4,700 calls witnessed unwinding of long positions as open interest in these calls declined by 2.57 million shares.
The 4,500 and 4,600 puts together shed open interest of 1.61 million shares, indicating that the Nifty has firm support above 4,600.