Nifty capped at 4920-4950 levels; telecom stocks to outperform ::Emkay

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Nifty capped at 4920-4950 levels; telecom stocks to outperform

View: We continue to believe that the recent relief rally will fizzle out at around the 4920-4950 levels. We suggest booking profits in long positions at those levels. We expect telecom stocks to outperform.

Nifty January futures open interest increased to 21.58 million shares from 21.44 million shares. The accumulation seems to be on the long side as indicated by FIIs data. FIIs remained net buyers to the tune of Rs3.96 billion along with an increase of 2.35% shares in open interest. Despite the index closing at 1 month high, no significant open interest accumulation suggests lack of confidence prevailing on upsides.

Among Nifty call options, maximum accumulation is concentrated at 5000 strike with an open interest of 6.74 million shares (Rs33.85 billion). Despite the up move in the index, an upward shift in accumulation pattern is not visible suggesting resistance placed at around the 4920-5000 levels. Among Nifty put options, maximum open interest concentration witnessed an upward shift to 4700 strike (7.50 million shares) from 4500 strike (6.99 million shares), indicating immediate support to prevail on any downside to 4700 levels.

Sectorally, we expect telecom stocks to outperform the broader index in the near term. Increase in futures open interest was observed in Idea (11.43 million shares Vs 10.54 million shares), RCom (28.12 million shares Vs 27.26 million shares) and MTNL (13.96 million shares Vs 13.80 million shares). Most of accumulation seems to be on the long side as indicated by increasing cost of carry and spot prices.