As expected, the spot Nifty and futures achieved our targets and closed on a positive note, but saw profit booking at the higher levels. At the peak level of the day, the Nifty achieved 61.8 per cent retracement of the November-February correction and hence the profit booking was inevitable. The India VIX, which gauges the cost of buying protection against losses in the S&P CNX Nifty Index, was down 8.7 per cent to 22.3 since March 1 and signals that the eight-day rally in the market may be sustained.
However, the rally is likely to be halted, as the Nifty saw strong selling pressure after big strong upside moves in the first two-and-half-hours of the trade. If there is a big, fast move – the market is said to be advertising for the opposite activity, responsive activity. If the responsive selling activity becomes the dominant activity, the trend will probably be halted. The volume picture chart suggests that if the selling pressure continues, the index may get support around 5,807 at the first instance and at around 5,767 thereafter. The upside may be terminated around 5,922.
The initial balance range (5,846-5,868), the first two trading periods of 30 minutes each saw 44 per cent volume and TPOs, significantly down from 80 per cent volume and 75 per cent TPO counts on Wednesday. The drop in volume in the IB range and 50 per cent volume above that range indicates price rejection by floor traders and hence some correction is inevitable. However, the market undercurrent remained positive as the TPO counts below the point of control (PoC) were higher than the upper potion of PoC (5,865-5,870).
The rollover in the Nifty April futures were at a 25-point premium to March futures and higher at 24.91 million shares compared to 22.93 million shares in the March futures on the day of the expiry of February series. The rollovers and its premium indicate the build-up of long positions.
The open interest build-up in the call and put options in the new April series hints support at 5,700 and resistance above 6,000. The build-up of short positions in the 5,700-5,800-strike put options and same was hedged through buying in the 5,900-strike put options. The traders sold 6,000-6,100-strike call options as they expect the market likely to be weakening above 6,000.