Large caps in the limelight

F&O OUTLOOK

The Indian markets recovered sharply to post handsome gains after opening in the red. Both the Sensex and Nifty futures continue to trade at a premium, indicating the accumulation of long positions.

The Nifty advance-decline ratio was positive at 2:1 and almost all the benchmark stock futures traded at premiums. This shows that the market is likely to move up further.

The driving force behind Wednesday's recovery was the fresh long built-up in large cap stocks. According to Anand Kuchelan, derivatives analyst at PINC Research, the broad-based participation in stock futures signals the possibility of a new high on a sustainable basis.

HDFC, ONGC, Bharti Airtel and Reliance Communication added fresh long positions. The Nifty could surpass the 6,200 level tomorrow and 6,400 before the expiry of the December contracts.

The Nifty PCR ratio rose further from 1.29 to 1.30, as Nifty Put options added 7.31 lakh shares as against 4.38 lakh shares in Call options. Some unwinding was seen in the 6000 and 6,100 strike calls, which were written earlier as the indices made new highs.

However, the market players hedged their positions by buying at-the-money puts. The PCR at the strike price of 5800 was high at 1.5, making it an immediate support level.

Technically, the immediate resistance for Nifty futures is 6221 and a decisive move beyond this level could take the Nifty to the next target of 6283.