Nifty may hit new high this week

The activities of foreign institutional investors (FIIs) with long build-up in the Nifty futures and short-covering in stock futures during the week ended September 13 augur well for the market. The Nifty is expected to hit a new high in the coming week if it crosses a crucial resistance at 5,060. On the downside, 4,940 is a healthy support level and, below that, 4,860 is the crucial support level. The Nifty rose over four per cent during the week largely due to short-covering from foreign investors in the Nifty and stock futures.

According to a technical analyst at Sharekhan Research, the hourly oscillators are in sell mode, giving negative divergence. The Nifty has made a triple top above 5,000, so going forward, it becomes important for the index to surpass this level to gain strength. If it is unable to do so, then it may fall. The Nifty may move above the 5,100 level on the back of short-covering by FIIs and a fresh long build-up in the Nifty futures.

The Nifty November futures, which traded at a discount in the previous week, closed with a 5-point premium to the spot and added 792,000 shares in open interest (OI), mostly through buy-side trades.

An unwinding of short position was seen in the 4,500-5,000 strike calls as traders expected strong support for the index around 5,000. The 5,100 and 5,200 call options added considerable open interest last week, mostly through buy-side trades.

The OI in the 5,100 call has increased from 1.88 million shares on November 6 to 3.32 million shares on November 13. Similarly, the OI in the 5,200 call increased from 1.97 million shares to 2.75 million shares. This indicates that traders expect the Nifty to move above the 5,200 level soon.

Strong support is seen building up at the 5,000 level as open interest for the 5,000 put has increased from 1.33 million shares to 4.62 million shares. The support level is expected to move to 5,100 if the three-fold rise in OI for the 5,100 put is any indication.