Nifty likely to trade at 4,800-4,900 in near term

Both the benchmark indices, the Sensex and the Nifty, are now technically trading near their immediate resistance levels of 16,700 and 5,000, respectively. Though valuations at the current level are stretched, a steady rise in liquidity in the market is fuelling the rally.

According to Gautam Shah, technical analyst at JM Financial, the short-term top is still far away as the market has broken out of a consolidation phase only a few days ago. However, Siddhartha Bhamre, derivative and equity analyst, suggests that the long traders should book profits at the current levels as this is a liquidity-driven market.

Nevertheless, the Nifty October futures today witnessed fresh rollovers as it added an open interest (OI) of 779,000 shares out of the day’s trading volume of 1.62 million shares. The Nifty September futures witnessed profit-booking as it shed 146,250 shares in OI despite an intra-day build-up of 1.62 million shares.

Unwinding in the call options was seen at 4,700 and 4,800 calls, while change of hands was noticed at the 4,800 and 4,900 call options. This means call writers are buying in-the-money and at-the-money positions as they are expecting the Nifty to trade around 4,800-4,900 in the near future.

The Nifty today gained 60 points and is now only 42 points away from its upside target level of 5,000. The trading volume in the Nifty futures and options (F&O) remained subdued because of lack of speculative interest and the gap-up opening. The stock futures witnessed a 20 per cent jump in volumes mostly due to short-covering and profit-booking.

However, the thin volume in the derivatives segment means traders are wary of taking either side positions at the current levels. The Nifty today rose 1.36 per cent to its highest close in almost 16 months, backed by gains in Tata Steel, SAIL, Tata Motors, Hindalco, Punjab National Bank and State Bank of India. The FII and DII indices compiled by Instanex Capital underperformed the benchmark indices, indicating that both foreign and domestic investors booked profit in the stocks of index heavyweights such as Reliance Industries and HDFC.