More consolidation afoot

F&O OUTLOOK

Friday's impressive rally compelled bears to cover short positions intra-day as the market surged higher defying all negative cues. The open interest (OI) position in September futures contracts has increased by a modest 6.96 lakh shares on Friday despite a traded volume of 290.76 lakh shares.

This suggests that short-seller covered their positions during the course of the day.

The order book position in the Nifty September futures contracts at the closing hours indicate that the Friday's rally could be a one-day wonder. The closing-hour order book shows that sellers offered 31,726 Nifty September futures contracts at 4,421-4,424, while buyers offered to buy 14,162 contracts at 4,419-4,420.

These orders were almost ten points lower than the Nifty September futures close of 4,429.15.

In the absence of any major triggers, the market expects some more consolidation before targeting a new all-time high. Global cues indicated by US Federal Reserve Chairman Ben Bernanke and President George Bush suggest that the Nifty may target the 4,500 level, where it will face stiff resistance.

The Nifty breached its crucial resistance of 4,440 on Friday and managed to settle above 4,460, which provided strong resistance during the session.

Continued support at 4,460 would aid the Nifty in targeting 4,500. A negative breach of 4,440 would dampen the ongoing positive momentum.

The weekly put-to-call ratio (PCR) of the Nifty OI in put and call options moved up from 1.34 to 1.45. The increase in PCR indicates that option writers are bullish on the markets.