F&O: Build up in longs should take Nifty up

The Nifty June futures contracts too ended above 4500 at 4516 on short-covering by bears and fresh long positions by bull operators.

The Nifty June futures discount narrowed to eight points at close after widening to 30 points during intra-day trades, while the open interest increased by five per cent and the price gained by 1.7 per cent, indicating short covering and fresh built-up in long positions.

Technical analyst Ashish Shroff of Ambit Capital expects the market to consolidate further, with the Nifty eyeing 4600-4650 levels. The bounceback would be on account of technical factors as the momentum indicators on daily and intraday charts show oversold signs.

The call options traders have already started unwinding their at-the-money short positions as the open interest in 4500 call options declined by a huge 50.6 per cent. Unwinding was also seen in 4600 call options as the OI declined 15 per cent. This clearly indicates that the Nifty is heading toward 4600 levels.

Put writing was seen at the strike price of 4400 (OI up 19 per cent), while put buying took place at 4500 (OI up 14.3 per cent). This shows that Nifty has a strong support at 4400-4500 levels.

Fresh long built-up was seen in Reliance Industries, DLF, HDFC Bank, Hero Honda, Bharti Airtel and several other index-based stocks. Ranbaxy futures, however saw a built-up in short positions, after the promoters sold 35 per cent stake to Daiichi Sankyo for Rs 737 a share, which was well below market expectations. The futures price fell by 0.4 per cent and the open interest increased by 15 per cent, indicating built-up in short positions.