F&O Outlook: Nifty rally hinges on a close above 2, 800

SOURCE:BUSINESS-STANDARD

The Nifty bounced back from the day’s low on short-covering but faced resistance above 2,800 and closed with a marginal gain of five points.
Nifty futures witnessed selling pressure at higher levels and the Bloomberg data suggested that 22 per cent volume, mostly from the sell side, changed hands in the last 60 minutes of trade. This indicated that the market sentiment remained weak and that the index might face strong resistance above 2,800. According to Ashish Shroff, technical analyst of Ambit Capital, the Nifty could see a bounce-back to 2,820-2,840 levels as technical indicators were still trading in the oversold zone. However, the index needed to close above 2,800 for any further rally. Shroff expects the Nifty to remain at 2,720 levels for the short term and for the medium term it may go down if it closes below 2,700.

The Nifty February futures shed an open interest (OI) of 2.58 million shares, while the Nifty March futures added an OI of 2.53 million shares. Both the series are trading at a discount, indicating that traders are unwinding long positions of the current month series and building short positions in the March series. Therefore, the Nifty may see high volatility in the March series.

F&O traders today continued to unwind short positions in most of the put options, mainly in 2,800 and 2,900 puts. Put writing was seen in 2,500-2,750 puts, indicating that the index has support at around 2,750 and may not retrace to the October low of 2,500. The 2,800 call witnessed change of hands as it added an OI of 9,650 shares despite a trading volume of 11.50 million shares. This indicated that 2,800 remained to be a high resistance point for bull operators.

Reliance Industries (RIL) snapped a three-day losing streak and closed in the green on short-covering. The stock recovered from the intraday low of Rs 1,253 and closed at Rs 1,292 in its February futures. Traders were seen buying Rs 1,290 strike calls and writing Rs 1,350 strike calls, indicating limited upside.