Strong FII flow key trigger for rally

The market made a strong bounce back on Tuesday after falling in previous two trading sessions on the back of recovery in global market.

The Sensex surged 424 points or 1.12 per cent to 38233 and the Nifty closed 129 points or 1.14 percent higher at 11,483.

The Nifty Mid Cap and Small-Cap Indices also gained with 1,377 shares advanced against 1,286 declining shares.

Major gainers were NTPC, Reliance Ind, SBI, Vedanta and Bajaj Finance gaining 3-4 per cent, while IOC, Infosys and Wipro, Tech Mahindra were among the losers.

According to analysts, strong FII flow is the key trigger for the elevated bullish sentiments despite the crude oil prices trading on the higher zone in international markets.

They expect the Nifty to consolidate in the broader range of 11600 on the upper side while 11200 on the lower front.

Technical View

"We continue with our positive view on the banking space and expect this rally to continue. We also expect participation from both Private Sector and the PSBs in this upmove," said Ruchit Jain Equity Technical Analyst, Angel Broking.

The Bank Nifty is trading all-time high due to strong foreign fund buying in the banking sector mainly PSBs on reports of improving credit demand and assets quality improvement. Any closing above 11600 level can lead Nifty towards  11700-12000 in the near term.

According to derivative analysts, fresh longs were formed in both Nifty as well as Bank Nifty.

"In Nifty segment, call writer of 11400-11600 looked intimidated and hence, they covered their positions. On the flip side, 11400 and 11500 put options added significant positions and considering implied volatility it appears to be on short side. Now, the maximum open interest concentration stands at 11500 call and 11000 put options, Sneha Seth Derivatives Analyst, Angel Broking said.

"Now, 11300-11350 acted as a strong support zone and we are also witnessing fresh buying in the system. In addition, massive unwinding took place in OTM call of 11600, which is indeed a good indication. Considering the above data points, we expect continuation of today's up move beyond 11600 mark. Hence, traders are advised buying 11450 call option on dips for the March expiry, Seth further said.

Since the broader trend for the market is up, traders used this dip as a buying opportunity today and hence, the Index resumed its uptrend with gains of 600 points.

Market View

On the sector front, banking was the top outperformer followed by Capital Goods and Consumer Durables, while IT sector ended with in the red on account of strong rupee.

"In the absence of key positive triggers domestically and fear of global economic slowdown, we expect markets to consolidate in the near term. Global developments and movement of crude oil prices and currency would remain on market radar. Any correction in quality Large / Mid Cap companies with strong growth prospects should be considered as a good buying opportunity. With central elections round the corner, volatility and nervousness is expected to remain high in the coming weeks," said Jayant Manglik, President - Retail Distri-bution, Religare Broking.