Nifty @ 4,600 in sight

The Nifty closed above 4,500 on fresh long build-up by foreign institutional investors (FIIs) in key index stocks such as Reliance Industries, Infosys Technologies, ICICI Bank and TCS. The FII holding in these stocks has been the largest among various categories of investors. Also, these stocks have outperformed the benchmark index. The Instanex FIIs Index, which tracks top 15 companies in the FIIs’ portfolio, has outperformed the benchmark index, indicating fresh long build-up from foreign investors.

The market is fully under the bulls’ grip. This is indicated by strong intra-day long build-up and fresh short covering in Nifty futures yesterday. The Nifty July futures closed at a premium to the spot and shed open interest (OI) of 533,350 shares despite intra-day build-up of 2.82 million shares. Also, August futures continued to add fresh OI at a premium to the spot, indicating a strong rally next month.

The Nifty is expected to get support at 4,400 as options traders unwinded short positions at 4,400 strike call and sold the same strike put. The 4,500 strike put added OI of 804,750 shares, mostly through sellers, while the 4,500 call witnessed unwinding of short positions during intra-day trade, indicating that index could stay above this level. Options traders expect the index to move past the 4,600 level soon and even overcome its earlier high of 4,709 in the near future.

According to a technical analyst at JM Financials, some technical studies indicate that the markets will comfortably take out their recent highs in the near term and head towards 16,500/5,100 plus by August 2009.

The analyst says the Dow is looking set for a breakout above 8,900 this week. Overall, the set-up remains extremely strong and he believes the best is yet to come.