Total futures and options (F&O) turnover was at Rs 2,599 crore, only 5 per cent of the normal day traded volume on the NSE. This means the two upward circuit filters (which lasted just 10 seconds), probably through auto generated stock data, are likely to be unreliable.
The first-ever upper circuit in the history of Indian markets also put the benchmark indices in the overbought zone with five days relative strength (RSI) at 89 and 14 days RSI at 80. An RSI above 80 is considered to be in the overbought zone. However, technically, the end of the day chart suggests that the Nifty may face strong resistance at 4,450 levels.
The end of the day bids in Nifty May futures suggest the traders were willing to sell Nifty above 4,400 and wanted to cover their positions around 4,360-4,370 levels. This means the upside is very limited unless fresh short covering happens tomorrow. Both Nifty futures closed with 47-53 points premium to spot, which suggests short covering from bear operators.
The short positions in call options could not be covered on Monday as there were no sellers even for the 4,300 strike call. There were no trades in 4,000-4,200 calls, which indicates that even buyers did not get an opportunity to book profits in these out-of-the-money (OTM) calls they bought before the election results.
DLF and Unitech gained more than 25 per cent each on short covering in the F&O segment. However, the bulls were not ready to give up long positions in May futures of DLF and Unitech witnessed no sellers but only outstanding buyers. This means we may see a further upper movement in these stocks going forward.
