The Nifty maintained its support at 5,240 and faced resistance around 5,300 to close in a Doji pattern, indicating uncertainty among futures and options (F&O) participants.
F&O volumes continued to be poor due to range-bound trading, indicating lack of interest at current levels. Technically, the Nifty has strong support at 5,240 and only a close below the 5,180 can end the ongoing pullback. The index is likely to spend some more time consolidating below the crucial 5,300 level before breaking out, says Gautam Shah, a technical analyst at JM Financial.
The trading volume in Nifty January futures remains at a low, indicating cautious approach by traders. However, positive development was seen in Nifty January futures, which closed at six points premium to the spot and added almost one million shares in open interest. Bloomberg data suggested that fresh build-up in open interest was mostly through buy-side trades, which indicated that a few F&O participants expected the index to move out of the trading range to move close to its short-term target of 5,380.
Interestingly, the 5,400 call saw short-covering and the 5,500 call witnessed buy-side trades, indicating a bull-charge ahead. Both 5,000 and 5,100 puts witnessed profit-booking from put buyers as they felt the Nifty was unlikely to correct sharply in the near future. The 5,200 put witnessed profit booking and added open interest, mostly through buy-side trades, indicating strong support. The 5,300 put also witnessed sell-side trades as F&O participants expected the index to move above 5,300 in the near future.
DLF and Unitech gained on short-covering and fresh long build-up while Bajaj Hindustan and Shree Renuka Sugar witnessed profit-booking. A Doji pattern (price formation where open and close are the same) was seen in index-based stocks futures such as Cipla, HDFC, Hindustan Unilever, ITC, Mahindra & Mahindra, ONGC, Tata Motors and Tata Steel, indicating indecisiveness among participants.