F&O OUTLOOK: Market expected to be positive in near term

The market showed some bullishness in the last 30 minutes of trade today with Nifty moving closer to 4,900 from around 4,840 on short-covering and strong global cues. Almost 18-20 per cent volumes changed hands in key stock futures and Nifty February futures in the last 15 minutes as bears seemed to have rushed to cover their short positions.

Bloomberg data suggest that bulls were building fresh long positions as the index kept moving towards 4,900 despite sell-side trades in Nifty and key stock futures. Also, short-covering in in-the-money and out-of-money call options suggests an upward breakout going forward. The Nifty February futures closed at a premium of 10 points and shed 262,200 shares in open interest, indicating short-covering by bears.

The Nifty is expected to open on a positive note as it closed at 4,856 on 30 minutes average basis while the last quoted price was 4,890. Interestingly, the SGX S&P CNX Nifty Index Futures changed hands at 4,954 in early trade over the counter, indicating a positive opening for the Nifty.

A breakout above 4,900 is possible in the near future with support for the Nifty likely to move around 4,800. The trading pattern in Nifty 4,900 and 5,000 calls observed from Bloomberg data in the last few trading sessions indicates change of hands in the 4,900 strike call and buying in the 5,000 strike call, probably to hedge short positions. This means the market is expected to be positive in the near term with resistance at 4,980.

Based on open interest of 6.35 million shares, strong support is seen at 4,800. The participants are expecting the Nifty to move above these levels in the near future as the 4,900 put saw sell-side trades and added 581,450 shares in open interest.