F&O expiry may see Nifty at new high

The market rebounded, with the Sensex gaining close to 500 points as short covering emerged ahead of F&O expiry. Strong buying was seen in sectors like Banks, Energy, IT, Financials and PSUs and major gains in index heavyweights like Reliance Industries and the HDFC twins added to the market momentum.

The Nifty closed at 150 points higher at 11,726 level, while the Sensex ended up 489 points at 39,054. The BSE Mid-cap and Ssmall-cap indices closed higher.

The market breadth was strong as 1,332 stocks gained and 1,308 shares declined. Top gainers in NSE Nifty were UltraTech Cement, BPCL, HCL Tech, Indusland Bank and ONGC, whereas Tata Motors, Hero Motocorp, Maruti, Coal India and Cipla were among the top losers.  

According to analysts, as the Nifty contracts go to expiry, it was a decisive day for the bulls with the index sustaining the supports placed at 11600.

Technical view
“The Nifty closed in positive territory as anticipated as the fall was an impulsive one; hence a retracement of the same was expected. Now, the Nifty has bounced as anticipated and the probability that the fall was wave C of an expanded flat is quite high. The support on the lower side is pegged at 11650 levels, which were acting as a resistance earlier,” sais Jay Thakkar, Head-Technical & Derivatives Research and AVP-Equity Research, Anand Rathi Shares and Stock Brokers.

According to derivative analysts, fresh long formation was seen in Nifty as well as BankNifty. “Recently, 11550-11570 has been acting as a sheet anchor for the Nifty and if we go back to the March series, there is an important observation that we had strong long rollovers with Nifty concluding the same series at 11570. This may be a coincidence but if we relate it with the above statistical evidence, this support has earned more respect from the market participants, said Sneha Seth Derivatives Analyst, Angel Broking.

“In Nifty, call writers of 11600 and 11700 looked intimidated and hence were in a complete hurry to cover-up their positions. On the other side, massive writing took place in 11700 puts. Considering this, we expect the expiry to pan out probably at new highs and the ideal strategy to play out this move would be to take a punt by going long on 11700 call options if Nifty gives a minor dip towards 11700 in the first half,” she said.

Market view
According to analysts, this is a consolidation phase and given that the trend is positive one should utilise the dips for short-term gains.

“There are some factors that we are seeing contributing to the distortion of bullish sentiments and an important one is VIX, which is above 23 levels and sustaining. While it has risen over 40 per cent in the last few weeks we are also seeing elevated crude oil prices. Both these are putting a shady picture of Index in the short-term as upside may remain capped,” said Mustafa Nadeem, CEO, Epic Research.