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Much discussed market range of 5,900-6,150 is breached but market has not shown major upside as of now and volumes too were not very significant. Well most of the participants may take it negatively we have some other thoughts to it.
Firstly, irrespective of what levels we are, or have we breached any resistance or are there fresh longs getting created or not; one factor we need to acknowledge is that after short span of selling in cash markets, FII’s are back to their buying ways in the segment.
If participants are fearing about liquidity withdrawal due to tapering by the US Federal Reserve, then let me give some insight on FII’s activity in first one-and-half months of CY2014. According to EPFR global data, FII’s have sold $21 billion in emerging markets. However, in the same period, their net activity in Indian markets was negligible.
What does this mean? It means that India is not among selling priority in FII’s list, thanks to certain monetary changes taken place in last two - three quarters. So, we are not very worried about significant downside to this market.
On Monday, FII’s were not just buyers in cash segment but also went net long in index futures after quite some time. Rollover in Nifty are less both in percentage as well as open interest terms, but we believe this is positive for the market as there is no long unwinding pressure on market and its light in terms of open interest at index level.
We are anticipating expiry around 6,250 and expect first week of March series to be broadly positive and hence recommend to continue to hold on to long positions. Implied volatility is at moderate levels and we are at the beginning of March series and hence buying 6,200 call is also advisable; but on dips.
The author is Head – Equity Derivatives and Technicals at Angel Broking
