Nifty may face strong resistance near 3,240

F&O OUTLOOK

The Nifty opened on a positive note on strong Asian markets and the second stimulus package from the Reserve Bank of India (RBI) and the government. The broader index closed above 3,100 at 3,121, while Nifty futures closed at a premium to spot at 3,123 on strong buying in cash and futures and options (F&O) segments.

F&O indicators suggest that the Nifty may cross 3,200-mark in a day or two, and gradually head towards 3,300 soon thereafter. Technical analysts expect the current rally to face a strong resistance near 3,240 with stop loss for long traders at 3,020.

Expectations of a further rise in the index are based on long build-ups in Reliance Industries, ICICI Bank and metal and power stocks. The Nifty futures added an open interest of almost 1 million shares during the settlement period after unwinding short positions intraday. Interestingly, the Bloomberg data suggest that 26 per cent trades in the Nifty January futures were taken place at an average of 3,122 through long purchases.

The bull charge in the market in the last couple of trading session and On Monday is noticed from short-covering in Nifty calls and profit-booking in puts. Call options traders covered their shorts and built up long positions of 1.14 million shares at 3,200 and 3,300 calls. On the other hand, put traders sold 3,100 strike puts and booked profit at 3,000, which indicates that they expect the Nifty to trade above 3,100 with a target of 3,200.

As expected, Reliance Industries closed above Rs 1,350 at Rs 1,366 on short-covering and fresh build-up of long positions. However, the average price at which the January futures changed hand was Rs 1,334, considerably below its settlement price of Rs 1,366.

The Bloomberg data suggest Reliance Industries witnessed strong buying above Rs 1,350 with 23 per cent trades changing hands at an average of Rs 1,367.

The options traders were unwinding short positions in Reliance Industries at 1,320 strike calls and building fresh longs at 1,350. A fresh call buying was seen at 1,410, indicating that Reliance Industries could move above Rs 1,400 in the near future.