The Nifty fell below 5,080 and closed at 5,066 on lack of buying support. The Nifty December futures continued to trade at a premium and shed 233,300 shares in open interest, indicating that bear operators are using the current sideways movement to cover short positions.
Bloomberg data suggest change of hands in Nifty futures in the first session and short-covering in the second session, which indicates that the participants expect the market to bounce back after consolidation.
According to technical analyst Gautam Shan of JM Financial, the Nifty completed its V-shaped recovery by testing the October 2009 high of 5,181 last week. The set-up on the short-term oscillator charts is slightly overbought and hence some consolidation can be expected early this week. The index can decline to around 4,900 levels, which is considered to be a strong support level. A breakout above 5,160 would lead to a quick rally to 5,300 levels, he said.
Trading in options suggests the Nifty may fall below 5,000 and may test 4,900 in the near future. This is because the trading volume in 4,900-5,000 calls has declined sharply in the last couple of days and Bloomberg data suggest profit-booking in these calls.
The 5,100-5,200 calls changed hands, mostly through buy-side trades, indicating that traders expected a sharp pullback after consolidation. The 5,000-5,100 puts witnessed profit-booking as participants expected the Nifty to move around 5,000-5,100 in the near future.
Bharti Airtel is poised for a fresh upmove as its December futures saw short-covering of 1.62 million shares.
Options traders wrote the 330 strike call of Bharti as they expected that the stock had strong resistance above Rs 330 in the near future. Reliance Communication witnessed profit-booking as its December futures fell over 3 per cent while open interest declined by 1.5 per cent.