Short covering in stock futures, huge call writing at 4300 level

MUMBAI: After an initial hiccup, Indian markets recovered smartly in afternoon trade on Friday on the back of positive opening in European markets. National Stock Exchange's 50-share Nifty closed the day 0.84 per cent higher at 4319 and August futures provisionally settled at a premium.

The August futures premium widened to 10 points from 4 points Thursday. The contract price gained 0.98 per cent and added 10.5 lakh shares in open interest. Rising open interest coupled with widening premium indicates some longs being added in the contract.

Interestingly, huge call writing was observed at 4400 and 4300 levels while 4200 strike saw call buying. On the other hand, 4300 and 4400 puts shed positions in open interest where as 4200 witnessed put writing from bulls. The options data indicates Nifty range at 4200-4400 levels.

"Short covering was observed in banking, metal and auto stocks ahead of F&O expiry next week. Metal stocks gained as weak dollar bolstered the commodity prices in international markets," said Amrit Mehta, an independent analyst.

"The F&O expiry next week may fuel the volatility in the markets. On Aug 29, Indian GDP data for Q1FY09 will be released. This is a figure market is waiting anxiously for. For banking sector, next week will be a tough one. Bounce back in crude prices is expected to continue and it may impact bank stocks," said Praveen Kumar, an analyst with large brokerage

"On Aug 28, US GDP preliminary data will be released. Advance estimates are indicating US economy to grow 1.9% annualized rate. If the actual figure comes in line with the preliminary estimate then it would mean recessionary fears are over and the Federal Reserve can concentrate on inflation fighting and we can expect rate hikes in US," Kumar added.

In stocks futures, Hindalco futures gained 4.17 per cent and Sterlite Industries jumped 3.7 per cent on short covering. Steel Authority of India August advanced 3.67 per cent.

Axis Bank August rose 4.83 per cent, Kotak Mahindra Bank increased 3.35 per cent and HDFC Bank gained 2.16 per cent.

Tata Motors futures gained 1.81 per cent, Mahindra & Mahindra advanced 1.53 per cent and Maruti rose 1.77 per cent.

Total F&O turnover on NSE was at Rs 44,332 crore, down 14 per cent from Thursday.

Meanwhile, European stocks rose as investors speculated takeovers may increase and a drop in oil boosted airlines and carmakers. U.S. index futures advanced, while Asian shares retreated.

thanks to: www.economictimes.indiatimes.com