Business OpportunitiesF&O OUTLOOK: Nifty likely to trade above 5,100 this week
The Nifty convincingly closed above the 61.8 per cent retracement levels of 4,940 on short-covering. The V-shape recovery is expected to continue with the Nifty likely to complete 100 per cent retracement this week of its recent fall from 5,181 to 4,538. Options data suggest the index has strong support at 4,900 and is building fresh support at 5,000.
- FIIs net buyers Rs 184cr in F&O on Wednesday - Asian markets flat in morning trades - US markets gain on strong data, growth forecast - Nifty likely to trade above 5,100 this week - Sensex surges 409 pts after dull start - Indulge in sector funds, cautiously
The Nifty November futures closed at a premium to the spot and added 698,350 shares in open interest, mostly a blend of long and short positions. Bloomberg data indicated short-covering by bears when the Nifty was trading above the 61.8 per cent technical retracement levels and profit-booking by bulls above 5,000.
Call writers covered short positions at 4,800-5,000 calls as these options together shed 2.34 million shares in open interest, mostly through buy-side trades, when the Nifty convincingly crossed 4,940. Traders also covered short positions at 5,100 call options as they expected the Nifty to move above this in the near future.
The Nifty is expected to get strong support at 4,900 as this put holds the second-highest open interest among all put options. The support is expected to move around 5,000 as this put added 2.20 million shares in open interest, mostly through buy-side trades. Interestingly, the 5,100 put added 0.48 million shares in open interest through sell-side trades. This indicates the Nifty is likely to trade above 5,100 this week.
Despite the surge, markets are not significantly overbought and hence there is room for further upside in the near term, says a technical analyst at JM Financial. The 4,800-4,830 zone would continue to act as a strong support based on the bullish breakout seen on Tuesday.