Call writers take a bullish view

F&O OUTLOOK

The markets opened on a firm note and proceeded to higher levels with every passing hour. The indices closed with handsome gains due to short-covering in banking stocks and fresh long positions in key index stocks such as Reliance Industries, Bharti Airtel and Hindustan Unilever.

The Nifty April futures traded at a premium of 15 points through most of the session, but the gap narrowed to 3-5 points at close. The Nifty April futures shed 1521 lakh shares (4.68 per cent) in open interest, indicating profit-booking by bulls.

On Monday's rally was in the nature of a technical pullback. The relative strength index (RSI) is moving between the support and resistance lines of 30 and 50 respectively, and these are acting as excellent reversal areas.

The markets also celebrated the strong Asian indices, firm Dow futures and stable European bourses. The expected hike in cash reserve ratio (CRR) did not come along, leading to a rally in major banking stocks including ICICI Bank, State Bank of India and HDFC Bank.

The Nifty moved in a range of 4770 and 4790 through most of the day. Technical analysts expect strength above 4850 and weakness below the 4600 level.

The Nifty PCR moved up from 1.09 to 1.18 as put writing took place in out-of-the money puts at the strike prices of 4500, 4,600 and 4,700. Call writers squared off their 4800, 4900 and 5000 call options on expectations that the Nifty would trade above 4950 in the near future.

The index, however, has an immediate resistance at 5000.