Foreign investors see a fresh bull run

The Nifty closed above the resistance level of 4,350 on the first day of the new F&O series on short covering by foreign investors and long build-up in key stocks futures. If the Nifty could maintain support around this level, then we may see the index crossing the 4,500 levels during the coming week. Trading in the Nifty options suggests that the index can move above 4,400 with strong support at 4,300.

Options traders were seen buying at-the-money (ATM) as well as out-of-the-money (OTM) calls on expectation of a fresh upmove in the index. Open interest (OI) in call options increased by 2.60 million shares, of which, 1.51 million shares were added through buying of OTM calls. The 4,700 strike call holds the highest OI among call options, which suggests that the Nifty has strong resistance above 4,700 in the near future.

The 4,300 put added an OI of 668,550 shares, while OI in the 4,400 put increased by 57 per cent, mostly through sellers. This means the Nifty can trade above the 4,300 levels and is likely to pierce the 4,400 levels next week. The 4,500 put witnessed negligible trading volume, which indicates that traders expect the market to move up.

Foreign institutional investors (FIIs) seem to have covered short positions in the Nifty futures on Friday as their OI in index futures has declined by 4 million shares. FIIs have also created fresh long positions in key index stocks on Friday as their OI in stocks futures increased by 84 per cent. This means that foreign investors expect a fresh bull run in the coming days.