F&O Outlook: Nifty all set to move up further

Both the Sensex and the Nifty have closed above the most crucial levels of 9,400 and 2,900 respectively, confirming a bullish reversal.

Technically, the market may see exhaustion in the current pullback when the Nifty completes 100 per cent retracement of its recent fall from 2,970 to 2,543. The 100 per cent Fibonacci retracement in the case of the Sensex is around 9,520 levels.

The options traders have indicated that the Nifty can move up to 2,963 as 2,900 call options closed at a 63-point premium. The trading data at the close of the day also suggest that the Nifty may rise further tomorrow as outstanding buyers were higher than sellers in the Nifty March futures as well as 2,900 strike call options.

The short-covering at 3,000 strike call options indicates that the Nifty would complete its retracement of 2,970 and may even go further. However, On Monday pullback has been the third gap in this rally and a fourth gap may indicate exhaustion.

Siddhartha Bhamre, derivative and equity analyst at Angel Broking, expects the current pullback to end abruptly as it is backed by only a few sectors, metals and oil, and the softening of dollar against all currencies. The Nifty is expected to rise further if the Federal Reserve plans to clean up the $1-trillion bad loans of US banks.

The Nifty March futures On Monday shed an open interest (OI) of 2.67 million shares and closed almost on a par with the spot, indicating that bears have covered their short positions. The Nifty April futures added an OI of 6.02 million shares in a blend of short and long positions. However, the April futures’ discount to the spot has been reduced further to four points, which suggests that some traders have rolled over long positions.

The March futures of Reliance Industries On Monday rose 7.4 per cent and shed an OI of 584,700 shares, indicating unwinding of short positions. Its April futures added an OI of 1.14 million shares and closed at a premium of Rs 4 over the March futures, indicating rollover of long positions.

Unwinding of short positions by traders at 1,410 strike call options suggests that the stock may move up further.