The S&P CNX Nifty opened on a positive note On Wednesday, but faced selling pressure above the 2,680-level and drifted in the red thereafter on grim economic outlook and profit-booking. The Nifty has been moving in a range of 2,600 and 2,680 in the last two days, indicating that the market is forming support for the index at 2,600.
The index has resistance above the 2,680-level and, hence, if it closes above the level, it could move up to 2,800, said technical analyst Ashish Shroff of Ambit Capital. The short-term resistance for the index is at 3,200 and the short-term support is expected to be at 2,500. The intraday resistance for the Nifty is at 2,800 and support at 2,620.
The recovery in the last couple of hours of trading is helping indices close on a more respectable note. According to markets analysts, the recovery should not be given any importance as it is mainly on account of intraday short-covering by day traders. The Bloomberg data suggest that around 35-45 per cent of trading volumes in the Nifty and stock futures are registered in the closing hours of trades.
The open interest (OI) position in the Nifty and stock futures has been on the decline in the past couple of days, indicating that F&O traders are wary of continuing their long or short positions. For instance, the Nifty December futures saw a significant addition in the OI in intraday trade. However, most of the players squared off their positions in the final hours of trade.
The OI in Nifty futures declined by 8.08 lakh shares on Tuesday and dropped by 2.87 lakh shares On Wednesday. Key stock futures such as Bharti Airtel, NTPC and Reliance Infrastructure witnessed a decline in the OI by over 1 lakh shares each largely on account of unwinding of long and short positions.