Gap-up opening likely

F&O OUTLOOK

Short covering at lower levels pulled up the markets after a sharp gap-down opening. The BSE Sensex took support at 19,255, while the Nifty retraced sharply from the day's low of 5,714. Both these levels acted as strong support for the market and hence we should see a gap-up opening on Monday.

According to Birendrakumar Singh, technical analyst at Religare Research, the gap down opening on Friday filled the gap created last Friday. This has cleared the stage for the Nifty and Sensex to hit new highs before the November expiry itself.

The Sensex is likely to be range bound for a couple of days next week, with Friday's low of 19,250 providing a strong support and the all time high of 20,238 acting as resistance levels, said Birendrakumar.

The Nifty futures made a sharp recovery on Friday as the bears opted for short covering. The Nifty November futures which were trading at a discount of 33 points to spot, closed with a premium of 22 points at 5,955. Short covering saw OI in November futures increasing by 1.18 lakh shares.The cost of carry was also positive at 6.67 per cent.

Birendrakumar is bullish on banks and power stocks. These sectors are likely to witness further upmove in the coming days.

Tata Power is set to break its all time high of Rs 1,400 early next week and then target Rs 1650-1700. The long term target for the power company is Rs 1,900. Tata Power saw short covering on Friday, as the open interest declined by 40,400 shares and the cost of carry was negative at 31.83 per cent.

The Nifty PCR ratio increased to 1.19 from 1.15 as Nifty put options added OI of 4.64 lakh shares, while call options added 74,000 shares in open interest.

The modest movement in PCR indicates indecisiveness on the part of derivatives operators. Both call and put writing continued to be centered at the strike prices of 5900.