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| Support level rises to 5,500 |
| B G Shirsat / Mumbai Sep 07, 2010, 00:29 IST |
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The Nifty moved higher along expected lines, on the back of positive global cues after better-than-expected US August jobs data and short-covering in index and key stocks futures. The strong buying and short-covering in laggard Reliance Industries (RIL) also lifted market sentiment. However, the Nifty could not reach the 5,600 target on account of profit-booking at higher levels.
We had indicated a strong opening for the market and a possible target of 5,600 for the Nifty in our F&O Outlook column in the Sunday edition. The undertone remains positive and the markets may see further gains on Tuesday with a target of 5,598 on the basis of time-price opportunities (TPOs). However, if the index moves above 5,600 with strong volume, resistance is expected to come around 5,647.
The open interest (OI) positions in both the Nifty calls and puts hints at support level rising to 5,500 and a strong possibility of the 50-share index crossing the 5,600 level. To the bulls' delight, the 5,600-strike puts added 2.16 million shares in OI, mostly through sell-side trades, while the 5,600-strike call witnessed a five per cent net addition in OI from buyers. This is a positive sign that should continue Monday’s rally.
The Nifty September futures saw short-covering of over three million shares, mostly during morning trades. According to Bloomberg data, most shorts were covered in the price band of 5,530-5,550. The market picture chart shows multiple distributions of point-of-control (PoC), hinting at bulls' dominance and a forced short-covering for bears. Some profit-booking was seen above 5,570 from small traders.
Among stocks futures, Tata Steel, Hindalco, ICICI Bank, State Bank of India (SBI) and RIL flared up between three and seven per cent each on short-covering and fresh long build-up. The September futures of RIL rose 2.68 per cent to close at Rs 958.65 on short-covering. Both TPO and volume data indicate significant price and volume action above Rs 938. The stock is now poised for some fresh upside with a price target of Rs 983-987 in the near future.
The September futures of ICICI Bank was up 4.12 per cent, while OI up 2.23 per cent on a long build-up. Volume projections suggest a price target of Rs 1,075 in the near future. TPO data also indicates a fresh rally in SBI with a price target of Rs 2,917.
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