The Nifty bounced back from the day’s low of 2,495 and closed at 2,554, much above the support level of 2,520, on short covering at lower levels. This has encouraged the bulls who expect markets to recover.
Technical analysts felt that the Nifty was unlikely to retrace to its October 27 low of 2,252 in near future. Technically, one can expect bullishness if markets open with a gap-up tomorrow. Flat opening without filling the gap may lead to sideways movement or new lows.
Siddhartha Bhamre, derivatives and equity analyst of Angel Broking, said that the downside from the current levels are insignificant and, hence, expect a pullback from the current levels. However, a pullback may not be as large as we saw when indices recovered by over 35 per cent from the low of October 27.
Trading in the Nifty options suggests that traders expect sharp recovery from the current levels. Buying was seen at 2,600 strike calls and short covering at 2,700 and 2,800 strike calls. Similarly, put writers were seen writing 2,500 strike puts and buyers were booking profit at 2,600-2,800 strike puts. This indicates that options traders expect the Nifty to move between 2,600 and 2,800 before the expiry of the November series.
The Nifty November futures too witnessed short covering at lower levels as its discount to spot narrowed to three points from eight points on Wednesday. Although the November futures added open interest of 3.35 million shares intra-day, majority of the shares were surrendered during the settlement. This indicates that bears have covered their short positions during the trading session.
However, with only five days to go for the Nifty rollovers in the December series, there has been a rollover of only 4.70 million shares, which is substantially lower than a rollover of 14.22 million shares in the November series by this time last month. This indicates that F&O players have been wary of taking further positions.
