Nifty July future closed at 5338.5 with a premium of 5 points over the spot Nifty. For the July series, the highest put built-up is seen at 5000-5200 strike prices, suggesting it to be strong support levels.
Open interest in Nifty call options is highest at 5500 strike price. Thus for a short term trading perspective Nifty is likely to trade in the 5200-5500 zone. 5400 is seen as strong resistance level.
FIIs have recently turned net sellers in index and stock futures and thus there will be resistance at higher levels. Also option writing is seen at 5500 levels. The premiums are fairly low with market not expecting a significant upmove above 5350-5400 levels. Any surprise move above 5400 can lead to smart short covering rally.
Stocks in the oil and gas sectorhave seen a good built up post government’s move on oil deregulation. An aggressive built up has been seen in OMC firms like IOC, HPCL and BPCL.
RIL is seeing some cost of carry returns, hinting at a positive bias for the stock. Real estate also has potential to surprise as there seems to be a fair bit of short positions in the system. ADAG companies continue to look positive. Capital goods space also continues to see buying interest.
Banks also saw good unwinding of positions in a small correction. Thus, downsides appear restricted here too despite noises regarding a rate hike.
From a positional perspective, pharma continues to look positive. Action also is being seen in the mid-cap space be it software, fertilizer, hotels or sugar. With Nifty poised to cross 5350-5400 levels, one can expect a more broad- based rally in the short term.
(Shrikant Shetty, Head-Equity Advisory, Unicon Securities)