Market looks strong

When the Nifty was trading below 4,100, investors had hedged their long positions in individual stocks by selling Nifty future contracts. Once this level was crossed, Nifty futures were bought by investors who squared off their previous shorts, thus giving an upward push to the Nifty futures and in turn, the cash market as well.

Further indications from the derivatives segment are positive as well. The cost of carry is at a comfortable level; the put-call ratio as per Tuesday’s data stood at 0.8:1. Along with a fresh build-up of long positions on the futures side, we are also observing a contrary short position build-up, thus giving certain stability to the system. When the next correction comes, these shorts will give support, as we will see a portion of them getting squared up.

If the derivatives segment cues are considered, then an upmove seems likely.

- Amit Hiremat, Derivatives Analyst, IDBI Capital Markets Services