By Ruchit Jain
Post the August expiry, Nifty rallied higher in Friday’s session from its ‘200 DEMA’ support. The rollovers in both Nifty and Bank Nifty were in line with their averages but FIIs had rolled major of their short positions to the October series. FIIs added some shorts post expiry, but since the global markets saw a relief rally, they covered some of their short positions ahead of the mid-week holiday. This led to an upmove in our markets too and Nifty rallied around 600 points from the September expiry’s close.
This upmove witnessed short covering and some long formations leading the Nifty above 17300 mark. However, the index has now reached its resistance zone and how the stronger hands position themselves hereon and the global markets movement is likely to dictate near term move. FIIs have covered some of their short positions, but still majority of their positions are on the short side and their ‘Long Short Ratio’ is currently around 20 percent only, which means 80 percent of the positions are on the short side. On the other hand, the client section has more than 67 percent of the positions on the long side.
In options segment, 17400 and 17500 call options for the coming weekly series have decent open interest build up indicating immediate resistance zone there, while the support seems to be placed around 17000. Now the indices have already seen an upmove in one week and as per the data, it is trading near the resistance zone of 17400-17500. Hence, one should look to lighten up long positions and stay cautious until the data changes or index surpasses the resistance zone. Only on a close above 17500, we would then see further strength coming in the market.
The recent correction in the markets from the high of 18100 was mainly because of rising bond yields and the rising Dollar Index, which led to depreciation of our currency triggering a sell-off by the FIIs. In last few sessions the bond yields and Dollar Index cooled-off from the highs which have resulted in this pullback move. Hence, the near term move would be more dependent on the global factors as these have strong correlation and thus, traders should keep a close watch on these global factors along with the derivatives positions.
(Ruchit Jain, Lead Research, 5paisa.com. Views expressed are the author’s own.)