Delivery-based buying indicates more upside

F&O OUTLOOK

With the next month series of the Nifty futures carrying a nine-month high open interest (OI) on the day of expiry, it indicates that the derivatives traders are expecting the markets to firm up further. In other words, the Nifty April futures has a build-up of 36.19 million shares in open interest on the expiry of the March series and, that too, on a marginal discount to spot, indicating long rollovers.

Jitendra Panda, senior vice-president of Motilal Oswal Securities, expects the current rally to consolidate further as it is backed by delivery-based buying from foreign institutional and retail investors. He says that the traders who went short earlier around the Nifty at the 2,600 level have not only covered their short positions subsequently but have created fresh long positions.

The options traders are expecting the Nifty to move above 3,100 with target of 3,175. This is indicated from the buying of 3,000 strike call options of the April series at an average premium of 175. The support is seen at 2,800 as the 2,800 put of the April series carries an open interest of 4 million shares, which is highest among all put options.

The market is on a one-way trip ever since the BSE Sensex fell to its three-and-half-years low on March 9. Technically, on hourly charts, the market is trading in the overbought zone and hence one should trade cautiously. Remember the five-day relative strength index (RSI) is at 93, which suggests an extreme overbought level. Kamlesh Langote, technical analyst of vfmdirect.com, says that there is no compelling reason to short, but it is too late to trade long.