Market activity has seen an improvement since the government unleashed its reforms agenda for fiscal consolidation last week. Besides a jump in FII inflows, market indicators like, cash and derivative volumes, as well as open interest in the index futures on the Nifty and the Bank Nifty have seen a significant rise. While a section of traders cites this revival to extend with market moving towards 5,800 mark, few believe that the political uncertainty could act as a hindrance for the Nifty to move above 5,650 swiftly.
?Undoubtedly, there has been a revival in market activity. While volumes have gone up, the jump in the open interest of both, the Nifty and Bank Nifty futures is on the back of formation of long positions created by the FIIs,? said Siddarth Bhamre, head of derivatives at Angel Broking. Bhamre believes that volume levels may continue to remain healthy going ahead as the Nifty tries to take on 5,650 for a likely move towards 5,750-5,800 in the ongoing September series.
The turnover in both the equity and cash segments have improved substantially since the last Friday. Cash segment volumes have averaged at R17,482 crore, their highest for such a period since February 29; derivatives turnover for the last four sessions stood at R1.70 lakh crore, against an average of R1.47 lakh crore for the first eight months of the year. Even the open interst of the Nifty futures has increased to 2.5 crore shares, a vast improvement from 1.5 crore shares witnessed in June.
?The open interst in Nifty futures have seen considerable improvement since in the recent past, however, it could be too early to term it as a trend as a chink of it is a result hedging activity carried out by arbitrage funds ,? said TS Hariahr, head of derivatives with ICICI Securities.
As per Harihar, the latest rise in FII buying is largely accounted by arbitrage funds as well as ETF purchases that have done currency reallocation after the rupee appreciated towards Rs 54 per dollar.
? Given the lower long-only allocations and uncertainty at the political front, market may find it difficult to continue its upward trajectory,? added Harihar. The latest data shows, that FIIs bought close to $14 billion worth of Indian equities, 10% of which took place in the last four trading sessions.
Nifty?s latest run was halted near the 61.8% retracement of its fall between November 2010 and December 2011. On the downside, the Nifty is likely to find a strong support 5450-5430 range which coincides with its August highs and 50% retracement of the latest bear market decline.
