Fresh long positions seen

F&O OUTLOOK

Both the benchmark indices opened above their breakout levels and strengthened further to close at all-time highs. As many as 37 Nifty stock futures gained despite the decline in open interest, indicating short covering.

The open interest in eleven others rose due to fresh long positions. Only three Nifty stock futures, Infosys Technologies, TCS and BHEL were marginally down on account of profit booking.

The Nifty December futures were up by 2.24 per cent and closed at a premium of 10 points at 6,107. But the open interest declined by 1.04 lakh shares, despite huge trading volumes of 21.16 million shares.

The fight between out-of-the-money Call writers and Call buyers was won by the buyers as the writers covered their shorts at 6,100 and 6,200 strike prices. Buying in Call options was seen near 5,900 and 6,000 strikes. But the low volumes indicated that writers were unwilling to take risks.

The Nifty PCR moved up from 1.27 to 1.29 as fresh long positions were being created through short covering. Support is emerging near the 6,000 levels as the Put OI at that level increased by 3.07 lakh shares.

Technical analyst, Sandeep Wagle of Angel Broking expects the Sensex to target 20,700 and move further to 21,250 levels.

The markets would be extremely positive if the Fed cuts the rates by 50 basis points. A 25 basis points cut in interest rates has already been factored in Tuesday's rally. The Sensex has a strong support at 19,400, in case of a correction.