F&O Outlook: Long positions may propel Nifty

The derivatives segment witnessed a built-up of long positions in index and stock futures and buying of in-the money call options. Markets should therefore be stable in the coming days.

The Nifty May futures gained 113 points and the premium increased from 16 points to 25 points on account of fresh long built-up (OI up 13.1 per cent).

There was buying of in-the-money calls at the strike prices of 5000-5,100-5200 and call writing took place in out-of-the money calls at 5300 level. As a result, the Nifty is likely to trade between 5000 and 5200 and encounter resistance at 5300.

The Nifty will continue to have a long-term support at 5000 as the 5000 put OI is 21 per cent of total OI in put options. Put writing is also increasing at the 5100 level, indicating this as an immediate support for the Nifty.

The indices rose to two-month highs on Tuesday after the Reserve Bank of India and the finance minister proposed various measures to tame inflation.

Fresh long positions were created in realty and banking stocks as the Reserve Bank of India maintained the interest rates. DLF was up 8.93 per cent and Unitech increased 9.2 per cent on fresh built-up in long positions.

Among the finance stocks, SBI (up 3.61 per cent) and HDFC (up 5.93 per cent) moved up accompanied with fresh long positions, while ICICI Bank gained 1.25 per cent.