More room for upside next week

The Nifty gained more than 100 points on a week-over-week basis. While doing so, it broke out above 2,880 to close the week at 2,950. However, the Nifty failed to pierce the 2,980 level last week.

According to Ashish Shroff of Ambit Capital, since technical indicators are trading in the neutral zone, there is room for more upside next week. The Nifty is expected to go above 2,980 and then move towards the medium-term target of 3,100. The index would take a support at 2,920 on declines, he added.

The trading activities on the F&O segment suggest that the Nifty is expected to trade above 3,000 as traders were seen unwinding their shorts at 2,800-3,000 call options on expectations of a government stimulus package in the interim Budget.

The Nifty February futures discount to the spot narrowed to two points from around five points yesterday and 13 points in the same time last month. The February futures added OI of almost a million shares in a day’s trade and three million over the week, indicating that fresh long positions got initiated in the week.

The March futures, though trading at a modest discount of five points to February futures, added OI of a million shares over the week. The index maintained its support base of 2,870 in the week and saw consolidation above 2,900. The options traders were seen unwinding their shorts at 2,800 call options, but in Friday’s trade they were seen covering their shorts at 2,900 and 3,000 call options.

The 2,800 put option saw significant unwinding, while fresh writing was seen at 2,900 and 3,000 put options. However, 3,100 call option witnessed a rise in OI of 390,150 shares at an average premium of Rs 25 a share.

This indicates that the options traders expect the Nifty to trade above 3,000 with resistance above 3,100 levels. The accumulation pattern indicates strong support levels at 2,800 for the index.