Positive signs for the bulls

The market celebrated two key events before they occur, with the Nifty, as expected, closing above 6,100 on short-covering by liquidity providers.

There was intra-day short-covering of around two million shares in the Nifty November futures, which closed at 6,150, up 111 points, or 1.84 per cent. The futures added 844,850 shares in open interest, mostly through buy trades, indicating long build-up.

The gap-up opening and a close at 6,150 indicated partial celebration ahead of the domestic monetary policy tomorrow and the announcement of the expected quantitative easing by the US Fed on November 3. The Nifty futures, after gap-up opening, saw buyers sitting on the bench for most part of the day, hinting at exhaustion at higher levels. The profit-booking by day traders above 6,160 suggested caution before these key events.

Technically, the hourly momentum indicator is well in the buy mode and the daily one is in a state of reversing on the upside, which is a positive sign for the bulls. The market picture chart is hinting at time-price opportunities (TPOs) and volume-based upside of 6,205. Over 73 per cent volume above the initial balance range (6,105-6,145) suggests the intra-day correction may get volume-based support at 6,122, Bloomberg data suggest.

There was short-covering in 6,100 call options and fresh short build-up of 1.22 million shares in 6,100 put options. This means strong support is being built at this level. The fresh long build-up in 6,300-6,500 call options and short-covering in 6,200 call options is hinting at a strong rally above 6,200 if these two major policy events fulfill investors’ expectations. Change of hands in 6,200 put options suggests fresh upside.

Among stock futures, ICICI Bank saw range-bound trading while Reliance Industries saw profit-booking after a gap-up opening. Mahindra & Mahindra and Ranbaxy closed on a bullish note while traders were cautious on Larsen & Toubro. TPO and volume data indicate an upside of Rs 1,281 for ICICI Bank, Rs 791 for Mahindra and Mahindra and Rs 629 for Ranbaxy.