F&O Outlook: Nifty to hit new high

The FIIs long build-up in the Nifty futures and short covering in stocks futures during the week ended November 13 augur well for the market. The Nifty expected to hit a new high in the coming week if it crosses a crucial resistance at 5,060. On the down side the 4,940 is healthy support and below that 4,860 is the crucial support level. The Nifty rose over four per cent during the week largely due to short covering from the foreign investors in Nifty futures and stocks futures.

According to technical analyst at Sharekhan Research, the hourly oscillators are in sell mode giving negative divergence. Nifty has made triple top above 5,000, so going forward it becomes important for index to surpass it to gain more strength failing which open gates for lower levels. It is expected that the Nifty can move above the 5,100 levels on the back of short covering by the FIIs and fresh long build-up in Nifty futures.

The Nifty November futures which traded at discount in the previous week closed 5 points premium to spot from has added 792,000 shares in open interest week over week, mostly through buy side trades.

The short unwinding was seen in 4,500-5,000 strikes calls as the traders expect that the Nifty has strong support at around the 5,000 levels. The 5,100 and 5,200 call options added considerable open interest last week mostly through buy side trade.

The OI in the 5,100 call has increased from 1.88 million shares on November 6 to 3.32 million shares on November 13. Similarly the OI in the 5,200 call increased from 1.97 million shares to 2.75 million shares. This indicates that the traders expect the Nifty to move above the 5,200 levels soon.

The strong support is getting build-up at the 5,000 levels as the OI at 5,000 put has increased from 1.33 million shares to 4.62 million shares. The support levels expected to be move around 5,100 levels if the three fold rise in OI at 5,100 put options is any indication.

The S&P CNX Nifty closed below the psychological 5,000 mark on Friday after moving in a narrow range in during intraday trade. IT, banking, metal and auto stocks rose. During the week, the Nifty remained volatile on account of intraday profit booking in the Nifty futures and options, but no short positions got initiated.