The benchmark indices rose 5.74 per cent on Monday on the back of a global rally, reacting to China's plan to spend nearly $600 billion to revive financial markets. However, volumes on both the cash and F&O segments of NSE, which hit a five-month low, suggest that players are wary of trading in volatile markets. However, some traders expect a further upside in the build-up of long positions in key stock and Nifty futures in the near future.
In the options segment, some traders were seen covering their short positions at 2,900-3,000 strike calls, while a few others were seen buying the 3,200-3,400 strike calls. Besides, fresh put writing was seen at the 3,000-3,100 strike puts. This suggests that call options traders expect the Nifty to move above 3,200, with the upper target of 3,400, while put writers expect strong support for the index at 3,100 and on the decline at the 3,000 level. Technically, markets will face resistance near the 3,240 level. Analysts expect a pause or reversal hereafter. A break-out above this level can lead to a further bullishness.
The Nifty November futures closed with a premium to the spot Nifty and added an open interest (OI) of 1.36 million shares despite trading volumes declining to a five-month low at 28.01 million shares. The Bloomberg data show that 22 per cent of trading volumes or 6.16 million shares changed hands in the last 35 minutes of trading on Monday at an average of 3,157 points, indicating that some strong buying emerged at the closing hours. This would have strong impact on the markets when it opens for trade tomorrow.
Index heavyweight Reliance Industries rose by a 7.2 per cent, its biggest one-day gain since October 31 on short-covering in the F&O segment. The November futures of Reliance Industries witnessed a trading volume of 5.63 million shares, but there was a decline in the OI by 6,600 shares, indicating short-covering by bear operators. Short-covering was also seen in Suzlon Energy, Hindalco and DLF. A fresh long build-up was seen in Tata Steel, ICICI Bank, Reliance Communications, NTPC and Chambal Fertilisers.
