Short covering boosts Nifty

The Nifty closed above the 4,500 levels on short covering in key heavyweights. The Nifty June futures also saw covering of intra-day short positions of around 2 million shares as traders were wary of creating fresh shorts.

However, it closed with a marginal premium to the spot and shed an open interest of 448,600 shares, indicating bears’ penchant for covering shorts at a dip than at higher levels. We had indicated that the Nifty was building new support above the 4,500 levels. The index bounced back from its intra-day low of 4,451 to close at 4,526.

However, the benchmark indices failed to close above the supply zone area of 14,930 for the Sensex and 4,545 for the Nifty. If the benchmark indices close above these levels, they may test the 15,580/4,650 levels. On the downside, the support for the Sensex is seen at the 14,570 levels, and for the Nifty, at the 4,430 levels. Banking counters, mainly private banks, have shown some sign of weakness with Kotak Bank and Axis Bank slipping 3 per cent on profit booking.

ICICI Bank and State Bank of India gained around 1.5 per cent on fresh long build-up in the futures and options (F&O) segment. ICICI Bank added an OI of 688,100 shares, while SBI added 186,912 shares, mostly through buy side trade.

The 4,500 strike call added an OI of over 200,000 shares, mostly through buy side volume, while the same strike put added an OI of 335,000 shares through sell side volume. This means the 4,500 levels may act as support level in the near future.