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Nifty: Positive bias to remain intact with support near 16000…

* The Nifty moved out of the prevailing range of 15600-15900 last week and gained almost 3% with the help of significant outperformance from the financial space. Significant buying from FIIs helped the index to surpass the psychological resistance of 16000. However, momentum has paused a bit among midcap and small cap space where small cap index closed the week negative

* On the options front, significant option writing was experienced at 16000 Put base. We expect these levels to hold even in case of some profit booking in the short term. On higher side, we believe Nifty may move towards 16450-16500 in the coming sessions

* Nifty futures open interest has increased to highest levels seen since March as range bound movement seen in the last couple of months has eroded Nifty open interest significantly. The current open interest in the Nifty is more than 25% higher than that seen in the July series. On similar lines, net longs from FIIs have also increased sharply. Till we do not see closure of positions, positive bias should continue

* Volatility index has moved back to sub 13 levels and there is no sign of any caution despite the Nifty making fresh lifetime highs. A buy on decline strategy should continue for the index till the volatility index remains below 14.5 levels

Bank Nifty: Move towards 36500 expected

* The Bank Nifty started the August series on an optimistic note as it rallied almost 1700 points last week. Most of the private banks witnessed short covering, which provided the required boost to the index. Moreover, PSU banks also participated, which kept the momentum intact

* The Bank Nifty has started the series with higher OI base and as the series progressed, we saw closure in OI positions which is a clear sign of short covering. Most of the bank’s quarterly numbers are out and we feel in the absence of any major negative, this short covering trend should continue

* Due to RBI policy, volatility remained elevated. However, no change in policy stands is likely to keep the momentum intact and the index should head towards 36500 levels

* The current price ratio of Bank Nifty/Nifty has moved to 2.21 levels, which rallied from 2.18. We feel outperformance in banking stocks should push this ratio further higher

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