Nifty 6000 in sight after the short squeeze

The stock market on Thursday touched a 19-month high accompanied by the highest-ever turnover with participants in the derivatives segment engaging in frantic short-covering and buying next month futures on the expiry day of the November series.
The Nifty rose 97.55 points to close at 5825 on expiry after high rollovers led the Nifty futures up sharply in the last hour of trade.
It prompted the weaker hands to unwind their short positions even as institutional investors bought in the cash market.
The combined turnover witnessed on both the exchanges on Thursday stood at `391,854 crore, surpassing the earlier high of `333,884 crore witnessed three months ago.
Siddarth Bhamre, head of derivatives at Angel Broking, said stability in the global markets along with favourable currency position has prompted foreign investors to buy heavily over the last two sessions.
“The government initiatives on foreign direct investment in retail have already been discounted by the markets. What has helped is the fact that global stability seems to have returned with reducing concerns over the US fiscal cliff and euro zone issues. Also with Indian markets underperforming their global peers recently and rupee depreciating to 56 levels, it has been nice entry point for foreign investors,” he said.
Experts believe that sharp surge in markets caused the weaker hands who had written calls at 5800 levels to unwind their positions today.
“The stronger hands bought heavily into equities in cash and futures segment in the last hour that led to short covering which further propped up the markets,” said Bhamre.
Yogesh Radke, head of quantitative research at Edelweiss Securities, said higher rollover cost on widening premium for next month futures also led to participants buying equities in cash market.
“The cost of rollover at 75 bps was higher than 40-45 bps in earlier expiries. So instead of paying higher costs than funding costs due to 42 points premium, many of the participants let their futures expire and instead bought equities in cash,” he said.