Bulls tightened their grip on the market on the first day of the new series with the Nifty October futures moving swiftly above 6,100 to close near the day’s high on short-covering at higher levels.
The futures settled at a premium of 33 points and shed 364,050 shares in open interest (OI), despite a trading volume of 23.43 million shares, which indicate that there would be no more short build-ups. The volume-driven rally seen over two consecutive days is expected to take the Nifty above 6,200 early next week. The time-price opportunities (TPOs) and volume-based projection indicate a level of 6,225 for the Nifty.
Over all, given the strong appetite from foreign institutional investors (FIIs), the Nifty is poised to cross a new high before Diwali. The quarterly data by EPFR Global on fund flows and asset allocation to financial institutions around the world show that India equity funds enjoyed strong inflows during the latter part of the third quarter of the current calendar year.
The inflow also eliminated the year-to-date deficit these funds carried into the second half of the year. According to data, these India funds saw net inflows of $938 million in the third quarter and $2.757 billion for the nine months ended September 2010.
On expectations of a strong bull rally in October, participants covered short positions in the 6,000-6,100-strike calls and built up long positions in the 6,200-6,300-strike calls. The put writing of over two million shares each in the 6,000- and 6,100-strike puts on the first day of the new series hints at the Nifty getting strong support at 6,100. The 6,200-strike puts witnessed an OI build-up of 466,900 shares through sell-side trades, which suggest that participants expect a trade above 6,200 for the Nifty.
Among stocks futures, Sail, Bajaj Auto, Sterlite Industries, Hindalco and Larsen & Toubro are expected to register volume-driven gains next week. The October futures of Sail added 3.05 million shares on a steady upward directional movement on Friday, indicating a long build-up. The volume-based surge is expected to take Sail above Rs 241 in the near future.
Bajaj Auto, which settled at Rs 1,548, saw 67 per cent volume above Rs 1,516.
The stock is expected to move up with a volume-based target of Rs 1,590. Hindalco is also expected to show a volume-driven rally at Rs 215, while Sterlite is likely to move up from around Rs 185. Reliance Industries should see consolidation above Rs 1,000, while ICICI Bank is expected to move up above Rs 1,150.
