Nifty support seen at 4,300

The benchmark indices closed with marginal gains on profit booking at higher levels by foreign institutional investors (FIIs). FIIs seemed to have sold shares of Infosys Technologies, HDFC, ITC, TCS and Sun Pharma, and bought Reliance Industries and State Bank. The ownership index compiled by Instanex Capital suggested that domestic institutions and retail investors were net buyers.

Market analysts expect strong opening for the Nifty due to the positive opening of the Dow Index futures and strong opening of the Instanex GDR Index, which was up 2.98 per cent on the opening bell. The SGX CNX Nifty July futures was quoted around 4,415 on OTC exchanges, which indicated that the Nifty might open above 4,400 tomorrow.

Traders were seen buying out-of-the-money calls (4,600-4,800) at a premium of Rs 60-100 per share on expectation of a fresh rally in the Nifty above the 4,600 level. The Nifty has strong support at around 4,300 as traders were seen unwinding their shorts at the 4,300 call and selling the same strike put.

The Nifty July futures closed on a par with the spot Nifty. The July futures had a built-up open interest (OI) of 1.89 million shares intraday, but it shed 322,450 shares in OI at the close, indicating short covering at lower levels. The Bloomberg data suggested that traders booked profit during the afternoon trade and covered short positions during the last 30 minutes of the trading session.

The recent correction has helped many technical studies turn healthier. The market continues to be in a consolidation phase within the range of 4,250-4,600. A medium-term breakout can take place only on a close above 15,600 for the Sensex and 4,650 for the Nifty. Most Asian markets have broken out of their consolidation phase last week that should accelerate their upward march.