Outlook: Market is evenly poised

Monday's technical rally saw an intraday build-up in long positions as the Nifty June futures open interest rose by 2.19 per cent and the discount almost vanished from 33 points seen on Friday.

The bulls and bears were seen covering their positional calls during the half hour trading session after close. The open interest declined sharply by 41,000 contracts during the half hour close-out period, after increasing by 18,000 contracts in intra-day trading, which indicates covering of positions by market participants.

The options activity shows that the Nifty has a strong support at 4500 and resistance at 4600. The 4500 call options saw unwinding in open interest and fresh long build-up took place in 4500 put options. With the bears writing calls at the 4600, 4700 and 4800 strike prices, these levels should act as a resistance for the Nifty in the near future.

The Nifty witnessed a technical bounce-back and closed near the resistance level of 4580 after making an intra-day high of 4618. Ashish Shroff, technical analyst at Ambit Capital, expects the Nifty to dip to 4510 in intra day trades as the daily momentum indicators turned into a sell mode.

The market is evenly poised. A close above 4600 could take the Nifty to 4750, while a close below 4480 or 4500 may drag the Nifty to retest the lows of 4370. According to some technical analysts, Monday's breakout on the upside is against the trend and hence long positions are risky.