Short-covering to boost key stocks

The Nifty has gained 5.63 per cent, or 274 points, in the nine trading sessions of the March series so far, and is set to move towards its January high of 5,310. The F&O data suggest that the market is in the bull grip with foreign institutional investors building up fresh long positions after covering their short positions in the index futures last week.

The Nifty March futures has been trading at a premium to the spot and added 2.52 million shares in open interest (OI) through buy-side trades, indicating long build-up.

The Nifty is expected to move up further next week, as the participants are building up long positions in the Nifty futures and key stocks futures. Key index stocks such as Reliance Industries, ICICI Bank, State Bank of India and Bharti Airtel are likely to show some strength next week on account of short-covering and long build-up during the week. The only concern is that the benchmark indices across the world have been trading in a narrow range in the last couple of days, indicating indecisiveness at current levels.

The long build-up was seen in the 5,100 and 5,200 strikes calls, as participants expect the Nifty to move up to 5,200 soon. Strong support is seen around the 5,000 level, as the 5,000 put holds the maximum OI among put options. However, the 5,100 put has been adding significant OI through sell-side trades in the past couple of days. This indicates that the Nifty may get strong support around 5,080-5,100 levels, going forward.

The time-price opportunity chart indicates strong buying in Reliance at around Rs 1,025 and short-covering above Rs 1,032. The stock is expected to move around the Rs 1,038 level in near future. ICICI Bank is expected to move up to around Rs 942 next week, as its March futures witnessed short-covering and long build-up. Bharti Airtel is expected to move up, as its March futures closed above the value area (Rs 295.50-298) on short-covering at higher levels.

ITC, which fell sharply due to unfavorable Budget proposals, looks stronger on account of short-covering. The stock is expected to move up around Rs 261, as participants have started building up long positions in the last couple of days. Hindustan Lever has slipped 6.2 per cent since the Union Budget on short build-up of 5.39 million shares. The stock closed below its value line area on Friday with time-price opportunity support at Rs 215.