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Huge put selling at 11,800 indicates bullish sentiment

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The market, which Tuesday rallied to and closed at a fresh high on the back of robust foreign fund inflows, is poised to test the psychological 12,000-mark in the current series expiring on April 25, provisional options data indicate. In percent terms, the market is short off this number by just 1.8 per cent from Friday’s record closing high of 11,787.15.

Index options traders sold a huge number of Nifty puts at 11,800, which is almost at-the money. Significant put writing was also witnessed at 11,700 strike, which becomes a solid support in case 11,800 gives way. This huge writing caused the open interest put call ratio of Nifty options to rise to 1.43 Tuesday, from 1.29 a day earlier. All the options expire on April 25 and data is provisional.

The call side shows 11,800 to be the first hurdle followed by 12,000.

The put writing reflects huge bullish sentiment in the short term. Market analysts such as Rohit Srivastava of Sharekhan by BNP Paribas and Rajesh Palviya of Axis Securities feel any dips are likely to be purchased and that the Nifty could have a shy at the 12,000-mark before or by expiry next Thursday.

“The amount of foreign funds flowing in has propped the market, which could aim at newer highs in the short term,” said UR Bhat, director, Dalton Capital Advisors, an FII advisory.

Stocks such as Reliance Industries and private banks such as ICICI and Axis are expected to be the vanguard of the rally, added Palviya.

On the NSE, FIIs have invested Rs 49,731 crore in equities in the calendar year through April 15. Against this, mutual fund investments have lagged at just Rs 309 crore, according to HDFC Securities.

The bullishness of FIIs is indicated by their being net long index futures – Nifty and Bank Nifty – while domestic participants like rich clients and DIIs were net short.

As on April 15, FIIs were cumulatively net long index futures by 57,299 contracts, data from NSE show. Clients were net short by 13,974 contracts and DIIs were net short 29,499 contracts.

Source: Economic Times