Bullish trend to continue

F&O OUTLOOK

The BSE Sensex pierced the 17,000-mark in early trade, but could not hold on to it due to profit booking. The S&P CNX Nifty rose to a new high of 4980.85 and drifted thereafter to close at 4940.50, up by 1.65 points.

There was a marginal build-up in open interest due to tomorrow's derivatives settlement. The F&O expiry could lead to volatility.

There could be some selling pressure at higher levels. Any correction is likely to find support at the previous highs between 4625 and 4650.

On the upside, the Nifty could touch 5000, but it is unlikely to go beyond that in view of the strong build-up of open interest in call options near the 4900 and 5000 strike price. The support for Nifty on the basis of put open interest exists near 4900.

The Nifty put-call ratio has been trading in the range of 1.60-1.70. This is not only a bullish signal, but an indication that the market momentum is strong. The Nifty implied volatility has been in the range of 20-33 per cent, which suggests that the market is near an intermediate top.

Though the markets closed flat, the advance-decline ratio turned positive after a negative trend in the last three days.

The Nifty put-call ratio moved up from 1.60 to 1.62 as put options added 14.68 lakh shares in open interest, while call options added 6.56 lakh shares. The total open interest increased by Rs 3,000 crore, despite a turnover of Rs 78,536 crore.

Technical analysts and broking firms continue to be bullish in the long-term. But since profit-booking will be a part of the daily market action, investors should be cautious and fresh buying should be done on dips, said Subhash Gangadharan, derivative analyst of HDFC Securities.