Indices may hit new 52-week high

The BSE Sensex & the S&P CNX Nifty are poised to hit a new 52-week high next week. Global cues are strong with Dow Jones closing in the green for three consecutive days and the SGX Nifty closing above 5,360 in off-market deals on the Singapore Exchange on Friday.

Foreign institutional investors covered considerable short positions in index and stock futures last week in anticipation a bull rally. The open interest in Nifty futures declined by almost three million shares due to short unwinding. The market picture chart from Bloomberg indicates top traders built fresh long positions through buy trades.

The Nifty closed above 5,330 on Friday on buying in telecom, technology and banking stocks, but volumes were marginally lower than the previous volumes.

In options, implied volatility has fallen marginally, indicating the market will trade with a positive bias on Monday. The next week is expected to be eventful with the Nifty expected to zoom past its previous 52-week high and top the 5,400 level. The Sensex is expected to move above its previous 52-week high of 18,047 some time next week.

Nifty July futures saw short-covering of two million shares on Friday in intra-day trade and fresh long build-up of around one million shares thereafter.

However, the Nifty moved in a tight range of 5,340-5,360 due to lack of support and profit-booking at higher levels. Bloomberg data show short-covering and significantly high volumes (over 55 per cent) near time-price opportunity (TPO) areas (5,350-5,360). Going ahead, minor resistance, according to TPO charts, is at 5,370, while the volume-based resistance is likely around 5,390.

The 5,200-5,300-strike calls saw unwinding of short positions while the 5,400-strike call saw short-covering and long build-up. Long participants also bought the 5,300-strike call and put on expectation of a major movement in the Nifty, breaching either upside resistance or downside support. However, build-up of open interest in the 5,200-strike put indicates the index is unlikely to go below 5,230 in the near future.

Among stock futures, Bharti Airtel gained over nine per cent on stake increase by SingTel. The July futures closed at Rs 307.35, up 9.7 per cent on long build-up of 1.43 million shares. The TPO data indicate a price target of 323 while volume data indicate that the stock can move around Rs 330. Infosys Technologies, which will publish its first-quarter results on July 13, is expected to cross 2,900 next week. Idea Cellular and Reliance Communication are likely to move up on long build-up. TPO data indicate a price target of 73.25 for Idea and Rs 200 for Reliance Communication.