The Nifty closed at 4,634 on Friday on short covering in heavyweight Reliance Industries and long build-up in Infosys Technologies, HDFC, ONGC and State Bank of India. However, the index has faced strong resistance above the 4,650 levels and trading data culled from the Bloomberg indicate that bears have build-up short positions at around 4,650-4,679 levels.
The selling pressure expected to continue next week and there are chances that the Nifty may go down below the 4,600 levels on Monday. The options traders are expecting selling pressure around the 4,600 levels; hence they booked profit in 4,600 call options (open interest declined by 288,700 shares) and bought same strike put options (open interest up 603,350 shares).
The trading volume in the Nifty call options suggest that the index unlikely to sustained above the 4,700 levels. The traders were seen writing 4,700-5,100 strike calls on expectation of selling pressure above the 4,700 levels. Also, of the total call OI of 13.80 million shares, out of the money calls accounts for 62 per cent. The 4700 call has highest contracts too and hence it is a strong resistance level.
The Nifty August futures which traded at 10 points premium to spot all through the day closed at par with spot indicating higher level selling pressure. The August futures had built-up open interest of 2.52 million shares during intraday trade, but at close the OI has increased by 0.89 million shares indicating profit booking and creation of short build positions.
The FIIs were net buyers on cash segment and expected to have sold index futures at the higher levels. The FIIs have considerably high holding in index heavy stocks such as HDFC, Infosys Technologies, ONGC, Reliance Industries and State Bank of India. These stocks have outperformed the market while they have bought shares worth Rs 582 crore on cash segment which indicates their buying in these stocks on Friday. On derivative segment short covering was seen in Infosys Technologies, Reliance Industries and State Bank of India while long build-up was seen in HDFC and ONGC. We may see some price action in these stocks on Monday.
