Benchmark indices may sail high

After a brief correction on Thursday, the Nifty jumped and closed around the resistance level indicated by the time-price opportunity (TPO) chart. The trading pattern in index futures and options suggests the market has completed the short-term correction on an intra-day basis and benchmark indices are now poised to cross higher levels. The Sensex and the Nifty are expected to trade convincingly above 18,000 and 5,400, respectively, next week.

The market on Friday saw very high volume, 82 per cent, around the value area (5,335-5,380) in the Nifty April futures, which indicates the index may get strong buying support around this level in the near future. Bloomberg data suggest buying by institutional players above the 5,360 level for covering short positions. The price projection using the TPO chart indicates the Nifty may move around 5,437.

The trading in Nifty options indicates short-covering in the 5,300-strike call and some long build-up in 5,400 call options. There was short covering in 5,500 calls. This means participants expect the index to move above 5,400. The support for the Nifty is expected to be above 5,300, as this strike put added 1.75 million shares in open interest through sell trades.

The 5,400 put added 1 million shares in open interest, mostly through sell-side trades. The build-up of open interest in 5,300 and 5,400 puts suggests strong upside movement in the Nifty next week. Short-covering by foreign institutional investors (FIIs) in index and stocks futures on Friday also suggests strong undercurrent.

Among stock futures, Reliance Industries, ITC, HDFC, ICICI Bank and Tata Motors saw strong buy support above the value area. Reliance gained more than 1.6 per cent on over 27 per cent volume above Rs 1,128. The TPO chart indicates that the April futures of Reliance may move around Rs 1,139 from Friday’s close of Rs 1,126.

Tata Motors rose 3.7 per cent on strong buy volumes above Rs 790. The April futures of Tata Motors may move around Rs 811, according to the TPO projection. HDFC closed above the value area and witnessed strong buying around the value area (2,770-2,835). The April futures may move up around Rs 2,930 as per the TPO projection.