F&O Outlook: Nifty heading towards 4400

The Nifty July futures contracts witnessed volumes of 38 per cent of the total trade in the very first hour. Trading took place at an average price of 4070 despite the decline in futures prices from a high of 4114 to 4050. Bears covered their short positions when the market stabilized at around 4050-4100 in the afternoon session.

The open interest in Nifty July futures at close was up by 2.85 million shares, but declined by 1.09 million shares after the trade-off session, indicating short-covering in Nifty July futures.

Reliance Industries, Reliance Infra, NTPC, Reliance Petro, Hindustan Unilever and TCS saw short-covering, with the stock futures gaining 5-10 per cent each accompanied with a decline in the open interest.

DLF, Unitech, Suzlon Energy, ABB, ITC and Reliance Communication rose 5-10 per cent each following a build-up in long positions.

The options data suggest that Nifty has a strong support at 4000 and a stiff resistance at 4500. Traders bought call options at the strike prices of 4200 (OI up 10.9 per cent), 4300 (OI up 18.8 per cent) and 4400 (OI up 8.14 per cent). The open interest at these strike prices aggregated 7.59 million shares or 30 per cent of the total call OI.