Short covering boosts market

F&O OUTLOOK

The benchmark indices gained around 7-8 per cent on the first day of the November series on short covering. Key index heavyweights in the banking, metals, oil and gas and technology stocks made gains.

The turnover on the derivatives segment of the NSE at Rs 37,000 crore on the first day of the new series was the lowest since May 2008, indicating that the F&O players remained cautious on building positions on account of gap-up opening and high volatility.

The Nifty November futures closed the trading session with a premium of 30 points to spot, while it settled at 2882, a three points discount to the spot Nifty. Open interest, which rose by 2.95 million shares intra-day, declined by 0.45 million shares during settlement after the trading hours. This is a clear indication that some F&O players would have covered their short positions and a few went for profit booking.

The banking and financial sector witnessed sharp upswing with ICICI Bank and HDFC Bank gaining significantly. ICICI Bank was up 17 per cent as its November futures witnessed short covering and fresh long build-up. HDFC Bank was up eight per cent on build-up of long position of 79,400 shares after covering short position during the morning session.

The index heavyweight Reliance Industries gained 14 per cent on short covering and fresh long build-up. The short covering was more prominent in Hindalco, Bharti Airtel, Chambal Fertilisers, Dena Bank, Axis Bank and Yes Bank.

The options data suggest that the Nifty has strong support at the 2700 levels as we saw options writers were covering their short position at the 2700 call and writing the 2700 put options. The index is expected to cross the 2900 mark on Monday as options traders were seen buying 2900 call and writing 2900 puts.