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| F&O Outlook: Nifty has strong support below 5,000 |
| BG Shirsat / Mumbai Dec 09, 2009, 08:21 IST |
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The Nifty recovered after falling below the crucial support of 5,080 to closed at 5,147 on short-covering at lower levels. The Nifty December futures, which closed at a premium to the spot and added 1.19 million shares in open interest, were expected to have built short positions at higher levels. Bloomberg data show buy-side trades in December futures below 5,100 and profit-booking and short build-up at 5,120-5,160, indicating short-term support and resistance levels for the Nifty.
A technical analyst at Sharekhan Research expects the index to face strong resistance between 5,162 and 5,182. According to him, the index has support at 5,051. Since the Nifty formed a double top at 5,182 last week, losing the support level of 5,051 is being termed as bearish. Gautam Shah, a technical analyst at JM Finance, said the 4,990 level on Nifty futures was important based on gap studies and should ideally not be broken. Positive divergence on hourly indicators suggests the indices have limited downside from current levels.
Options traders expect the index to face strong resistance between 5,100 and 5,200 as Bloomberg data show profit-booking in 5,100-5,200 calls, mostly through sell-side trades. The volume in 4,900 and 5,000 calls remains low, indicating that the Nifty has strong support below 5,000. The 5,000 and 5,100 puts together added 1.23 million shares in open interest through buy side-trades, indicating hedging of long positions by bull operators.
As expected, the December futures of Bharti Airtel closed at Rs 330 on-short covering. The stock was expected to move above Rs 350 with support at Rs 320 as traders wrote the 350 strike call and the 320 strike put. Among other Nifty gainers, DLF, Unitech, Tata Motors and Reliance Communication saw short-covering and long build-up. Unitech rose 4.5 per cent and saw long build-up of 6.19 million shares. Suzlon Energy gained 2.2 per cent on fresh long build-up of 4.8 million shares.
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