The hike in repo and reverse repo rates by 25 basis points by the Reserve Bank of India on Friday evening is likely to put a brake on the post-Budget rally. The SGX Nifty March futures traded at 5,195 on the Singapore OTC exchange on Friday evening, down 1.39 per cent over the official close of 5,268. This means, the Nifty is expected to open gap-down on Monday around 5,200, while the 30-scrip BSE Sensex is expected to open gap-down by over 200 points at around 17,350. A gap down occurs when the opening price is less than the previous day’s low.
Meanwhile, the Nifty moved closer to the January 10 level of 5,310, as indicated in the F&O column last week. The trading pattern in the Nifty futures and options gave us clear indication of a fresh rally from Monday where the 5,310 target would have been easily met next week. However, the RBI’s decision to increase rates by 25 basis points may be the beginning of high interest rates regime.
Nevertheless, the options participants were expecting a strong upmove during the expiry week as the 5,400 strike call witnessed significant build-up in open interest (OI) through buy-side trades. The unwinding of short positions in 5,200-5,300 calls of the March series suggest that the Nifty may settle around the 5,300 level on the day of expiry.
The Nifty March futures, which closed at a premium to the spot witnessed change of hands, mostly short-covering among bulk buyers. The March futures shed 293,250 shares in OI despite an intraday build-up of 1.55 million shares and only three trading sessions left for the current series expiry.
However, the April futures added 1.47 million shares in OI through buy-side trades, indicating that participants are building long positions in the next month series. However, the build-up of OI in the April series suggests that the participants are rolling over long positions as OI build-up has been on the line with the March series.
Among stocks futures, Reliance witnessed strong volume (38 per cent) above Rs 1,086, mostly in the form of short-covering. The time-price projection chart indicates that Reliance can move up around Rs 1,097 next week.
