Nifty futures turn to premium, outlook firm

As expected, the Nifty September futures covered 50 per cent of recent losses to close above the 5,000 mark on account of short covering. We had indicated in our Monday edition that strong global cues would lead the significant recovery to touch 5,000. The September futures also achieved our target of 5,022 before closing marginally lower at 5,014, on account of strong buy-side trades from other time-frame traders above 4,996. The close above 5,000 is positive and should bring cheer back on the street and get the attention back to 5,255.

The trading pattern in the September futures showed buying from other time frame traders above the upper band of initial balance (IB) range (4,952-4,997). The market saw strong volume-based buying post noon, around the day’s low of 4,924, to take the September futures around 5,022 at close. The market undercurrent continued to be bullish and that would take the Nifty above 5,081 this week. The Nifty is expected to test 5,125 and even move further at around 5,254, suggested the market picture chart sourced from Bloomberg. The support will be at 4,950 and at 4,901, thereafter.

According to Moses Harding, head global markets Group, IndusInd Bank, it is not the time to stay short on the market and it is time to stay long on ‘risks’, given the good probability of reversal of post S&P downgrade losses. The correction process can extend till the September FOMC meeting. There’s hope that FED will keep the market vibes positive in the short term and allows US President Barack Obama to set things right on the fiscal side to ensure long-term growth comfort. For now, the attention is back into 4,900-5,150, with the next pit stop at 5,150, to set up near-term range play within 4,800-5,300.

Index heavyweights that had participated in the current pullback are expected to provide major force to the current momentum. The market pictures chart is hinting at a price level of Rs 805-854 for Reliance Industries, 453-484 for HDFC Bank and strong upside around 2,402-2,495 for Infosys Technologies. The September futures closed at premium to spot and saw unwinding of 2.74 million shares in the settlement period. This suggests short unwinding and fresh long positions by new players.

Options traders build-up fresh short in 4,900-5,000 strike put options and initiated a short covering in the 5,000-5,100 strike call, as participants expected the current rally may get extended to around 5,150.