The Indian market outperformed the Asian emerging markets on proactive financial measures of the Reserve Bank of India (RBI) last week. The BSE Sensex and the S&P CNX Nifty gained 5.6 per cent each, led by a strong rally in realty, capital goods, bank and power stocks.
Derivatives analysts expect a further consolidation and do not rule out the Nifty hitting the 3,200 level in the near future. According to Siddhartha Bhamre, a derivatives and equity analyst at Angel Broking, the current rally has been fuelled by short-covering and hence it has a very limited upside. The Nifty is expected to rise to 3,300, where it could be under selling pressure.
The trading volume on NSE’s F&O segment in the last two trading days suggests that traders are wary of taking any position on account of a gap-up opening. Key index heavyweights such as Reliance Industries, State Bank of India, Bharti Airtel, Larsen & Toubro and DLF were up on Monday on short-covering rather than a build-up of long positions. ICICI Bank, HDFC and HDFC Bank gained considerably over their closing levels on Friday, but witnessed profit-booking at higher levels.
The November futures of Reliance Industries witnessed a trading volume of 6.58 million shares intraday, but the open interest (OI) declined by 126,375 shares, indicating short-covering by bear operators. Short-covering was also seen in Hindalco, Larsen & Toubro, DLF and Ranbaxy.
The Nifty November futures closed with a premium of two points over the spot market as against a discount of four points on Friday. The OI in Nifty futures increased by 2.85 million shares intraday, but only 0.65 million shares were carried forward to the next day, indicating short-covering by bear operators. The Nifty options traders expect the index to move up gradually from 3,100 to 3,300 and 3,400 as traders were seen buying 3,200, 3,300 and 3,400 strike call options.
