Global cues key for week ahead

The US jobs data and developments in the Greek financial crisis could be important catalysts for stocks in the week ahead. In the domestic market week ahead will largely be driven by post-budget reactions. Market players have largely welcomed the Union Budget 2010-11, which proposed market friendly measures.

The stock market remains closed on Monday, 1 March 2010 on account of Holi. For the near term, analyst at HDFC Securities expects markets to rise and run into resistance at higher levels. Micro level performance and expectations and negative global factors could puncture the temporary feel-good feeling generated by the Budget beyond a few days.

However, a realistic and progressive Union budget for 2010-11 failed to stimulate the F&O participants as markets wiped the post budget gains on profit booking at the higher levels. The Nifty March futures closed at 4,935, down sharply by 67 points from intraday high of 5002 as traders booked profit.

The Nifty is expected to move in a narrow range next week with resistance likely to be above the 5,000 levels and support at 4,800 levels. The markets analysts have indicated that the key risk factors in a very strong growth environment are a combination of rising inflation and fragile risk appetite.

Morgan Stanley in its post budget review indicated positive outlook on Indian equities, but they would prefer to buy on dips. No wonder the Nifty March futures added open interest of 1.02 million shares despite intraday build-up of 4.16 million shares. This means, the traders preferred to play safe and booked profit to maximize post budget gains.

The Nifty March futures though closed at a premium to post it holds open interest of 22.63 million shares which is lower by 7.29 million shares compared to OI build-up of 29.92 million shares on the first day of the February series. The intraday treading pattern observed from the Bloomberg indicates short build-up of short positions when the Nifty moved above the 4,965 levels.

The intraday trading in the Nifty options indicate short covering at the 4,900-5,000 strikes calls when the Nifty moved up sharply from around 4,885 on strong budget proposals. The participants were buying the 4,800 and 4,900 strikes puts mostly to hedge short positions when the Nifty moved sharply above the 4,950 levels.