Technical indicators like the Relative Strength Index heading in the positive direction and momentum oscillator Directional Movement Index in the buy mode suggest one should be optimistic on the markets in the near term.
However, with foreign players selling in cash and index futures, fall in Nifty futures premium along with call writing at 3000 levels, analysts are advising market players to book profits in their long positions on Nifty around 2950-3000 levels to re-enter at lower levelsOn Friday, after a decline of 3.5 per cent in early trade, indices recovered sharply in the late trade. Nifty December futures closed at 2921.70, a premium of just 0.35 points from 8 points on Thursday. However, given the long build up in the midcap stocks suggests restoration of confidence in the market.
"This is a traders market. Players are directionless. Investors are going short in early trade and covering up shorts at late trade and vice-versa. If one can look through the technical chart for past few days, markets are making a doji candle-- suggesting market is waiting for a breakout to either side," said Sanjay Rao, analyst at Spark Advisory.
Call buying was observed at 2900 and 3200 strike while good amount of tussle can be seen at 3000 level. Bears unwound their written calls at 3100 strike. On the other hand, huge amount of put writing was observed from strike 2900 to 2700. The call build up was little lackluster while solid put writing was seen at lower levels. This indicates Nifty will remain volatile in a range but won't fall significantly from current levels.
3000 is a very crucial level and if Nifty decisively breaches this level on closing basis, one can again go long on Nifty. On the downside Nifty is likely to take strong support at 2800-2825 levels where we have seen aggressive put writing.
Put-call ratio of Nifty open interest rose sharply to 1.34 levels from 1.08 levels earlier last week. This rise in put-call ratio led by huge put writing at 2800 strike indicates market players expect 2800 to act as a very strong support for Nifty in near term.
"Nifty once again stopped the fall around the congestion zone of 2700-2800 to bounce back into early 2900. The confidence in the rally was visible in the put writing in near at the money strikes of 2700, 2800 & 2900 along with reduction in calls. However the over optimism depicted into put-call ratio of Nifty December futures of 1.41 might just hold the pace of increments approaching the hurdle around 3000," Motilal Oswal said in a report.
On weekly basis, overall open interest increased by whopping Rs 11,978 crore or 30 per cent to Rs 51,615 crore. Nifty futures added enormous 28 per cent in open interest and foreign players net bought index futures worth Rs 2002 crore. To be sector specific, long build up was seen in oil & gas, power, sugar and telecom sector.
Stock specific build up of long positions were observed in Balrampur Chini, Essar Oil, IDBI, JP Associates, Reliance Infra, Triveni Engineering and Voltas to name a few. Volatility index fell further to 49.43 per cent from 52.05 per cent in the week.
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