Upswing likely to continue

F&O OUTLOOK

The SGX CNX Nifty September futures touched an intra-day high of 4,500 and closed at 4,348 on the Singapore Exchange on Friday against the index’s close of 4,273 on the National Stock Exchange (NSE). The world markets closed in the green on Friday, with the Dow Jones adding another 370 points to its 410-point gain on Thursday.

We expect the uptrend to continue on Monday, with the Nifty crossing the 4,350 mark during the early trade on Friday. The upside for the index is capped between 4,400 and 4,500.

The Nifty September series have the highest call open interest (OI) at the 4,500 strike, with the put OI concentrated at the 4,000 strike. This indicates that the index has support at 4,000 and strong resistance at the 4,500 level.

The Nifty futures OI increased by 2.39 million shares to 38.65 million shares on Friday, with its premium to the spot market rising to 28 as against the premium of 6 points in the previous session. This indicates a build-up of long positions. The September series witnessed a 15 per cent rollover.

The rollovers were 100-200 basis points lower compared with those in the same period last month, largely due to an increase in the implied volatility, which has risen from 30-35 per cent in the previous week to 40-55 per cent last week.

Foreign institutional investors (FIIs) were net buyers in the index futures on Friday and their OI rose from 15.52 million shares to 17.82 million shares, indicating a build-up of long positions.

According to provisional figures, FIIs were net buyers in the cash market to the tune of Rs 1,016 crore and net buyers of stock futures worth Rs 866 crore. This shows that FIIs did some value buying in the cash segment and built up some long positions in the stock futures on Friday.

The trading activity in stock futures increased substantially on Friday, with a long build-up seen in Steel Authority of India, Tata Steel, Infosys Technologies, Wipro, TCS, ICICI Bank, Kotak Mahindra Bank, ONGC, Reliance Industries and HDIL. Short-covering was seen in DLF, HDFC Bank, Satyam Computer and Jindal Steel. We may see fresh consolidation in these stocks next week.