The Nifty faced resistance at 5,300 and closed below its nearest support of 5,220, indicating that there is a risk that it may lose its support of 5,200. We had indicated last week that the index might not move above 5,300 and lose its support of 5,200. Now, the Nifty has crucial support at 5,150-5,180 and a close below 5,180 is likely to lead to fresh weakness. Open interest build-up in Nifty puts suggests the index has strong support at 5,000-5,100.
Profit-booking and creation of short positions at higher levels led to a 50 per cent rise in trading volume in the futures and options segment. The trading in Nifty January futures rose sharply by over 10 million shares as participants booked profit due to high volatility in the morning session. Despite this, Nifty futures shed 134,550 shares in open interest, mostly through sell-side trades, indicating short build-up at higher levels and short-covering at lower levels.
Nifty 5,200 and 5,300 call options have added considerable open interest, mostly through change of hands in the 5,300 call and sell-side trades in the 5,200 call. This means the index continues to face strong resistance at 5,300 and its 5,200 support is likely to be broken in the near future. The 5,200 and 5,300 puts witnessed short-covering while the 5,100 put added 432,900 shares in open interest through buy-side trades, indicating a weak market ahead.
Technically, the market trend looks positive despite the sideways action in the past three trading sessions. From here, crucial support is at 5180, which had acted as a tough resistance earlier and is now a support along with 5,160, which is the swing low. So, the Nifty may retest the triangle from which it has given a breakout and then move up again, indicate technical analysts at Sharekhan Research.