The market discounted weak global cues and surged ahead of the Union Budget on Monday. Index heavyweights Reliance Industries, ICICI Bank, HDFC and Larsen & Toubro led the 1.75 per cent gains in BSE Sensex & SP CNX Nifty. The Nifty cleared the resistance level of 4,350 to close at 4,424. The crossing of the 4,350 level means that the index may test the 4,450 level and close above this level on Monday.

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According to technical analysts at HDFC Securities, the Friday’s rally brought the bulls in control as the main indices cleared the resistance level of 14,700-14,780 (for the Sensex) and 4,350-4,380 (for the Nifty) to close near the highs of the week. Both the indices have closed above their 13-day short-term moving averages, which is a positive signal at least in the near term.

Options traders expect the Nifty to consolidate further and even move above the 4,600 level during the coming week. Resistance is seen at 4,700 as this strike call added an open interest (OI) of 1.48 million shares intraday, mostly by sellers. The 4,600 call options added an OI of 503,650 shares, mostly by sellers, at a premium of Rs 150 per share. This means the Nifty’s is unlikely to close above the 4,750 level in the current month series.

The Nifty July futures were trading in a range of 5-7 points discount to the spot for most part of the trading session and maintained a discount of 5 points at close. Open interest in the Nifty July futures increased by 2.70 million shares intraday, but declined by 258,800 shares at close, indicating unwinding of some short as well as long positions. The Bloomberg data suggest profit booking at the 4,420 level and short covering around the 4,320-4,340 level.

Speculators were seen building fresh long positions in HDFC, IDBI, IDFC, IFCI, Larsen & Toubro and State Bank of India. Short covering was seen in Reliance Industries, ICICI Bank, Tata Steel, Steel Authority of India and Jaiprakash Associates. We may see fresh rally in these stocks going forward.

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