F&O: Nifty likely to hit 3,100-level

Markets kicked off the New Year on a positive note, rising 2.7 per cent and value-buying in key index stocks such as Reliance Industries, ICICI Bank and State Bank of India. However, the rise has not been supported by trading volumes and, hence, consolidation is possible only if the market rises with big volumes.

The good news, however, is that the Nifty has closed above the 3,000-level, the first time in the January series, and now heading towards 3,100. Traders were seen unwinding their short positions at 3,000 and 3,100 and writing 3,000 strike put. This indicates that the Nifty may climb to 3,100 levels with a new support base of 3,000. Nifty January futures were trading at a premium of five-seven points to spot for the first half of the session but expanded to 10-12 points premium in the final hour. The January futures added open interest of 1.5 million shares during the intraday trade, but only 643,250 shares were added at close. This indicates build-up of long positions and unwinding of short positions by Nifty traders.

Reliance Industries (RIL), which met with profit booking above Rs 1,260 in the last couple of days, closed above that level today. The January futures of RIL have shed open interest of 217,725 shares despite a trading volume of 3.85 million shares, indicating short-covering by bear operators. Traders were seen buying 1,260 strike calls and writing 1,290 calls, indicating that the stock may face resistance at Rs 1,290.

ICICI Bank rose 3.5 per cent after the lender cut its main lending rates by 50 bps, joining other institutions that have lowered rates to revive demand growth. The January futures of ICICI Bank shed open interest of 48,475 shares, while the options traders were seen buying 460 strike call options, indicating unwinding of short positions.