The Nifty today recovered from its support level of 4,620 on firm European markets, but could not hold above 4,700 levels due to profit-booking and closed at 4,694.
The Instanex FII index suggests that foreign investors have bought index heavyweights Reliance Industries (RIL), Infosys Technologies and ONGC.
The trading volume in Nifty August futures indicates that the spot index is likely to close above 4,700 tomorrow. The August futures closed at a 10-point premium to the spot and added an open interest (OI) of 901,550 shares.
As the intraday data suggest, bears started covering their short positions when the index was trading around 4,650-4,660, and intraday traders booked profit above 4,700 levels.
The 4,700 and 4,800 calls witnessed change of hands and intraday trades suggested that buyers and sellers were evenly matched. The 4,700 call added an OI of 411,150 shares and held the highest OI among call options. The 4,800 call too added a fresh OI of 320,850 shares and held the second-highest OI among call options. This means call buyers are expecting the Nifty to move above 4,900, considering a premium of Rs 122 per share, while call writers are seeing increased volatility above 4,700. The index is likely to continue having a strong support around 4,600 levels.
A technical analyst at Angel Broking says that if the Nifty trades convincingly above 4,700 levels, then it is likely to test 4,730-4,790 levels. However, on the downside, 4,600-4,580 levels may act as a support. Another technical analyst (at JM Financials) indicates that the index would play around with levels on a day-to-day basis just to get rid of the weaker hands. Technically, the only concern is the setup on the daily oscillators as it continues to be overbought and hence a little more consolidation can be expected.
