The Nifty failed to sustain above the strong resistance at 5,160 and closed at 5,118 after getting support at 5,080. We had said in this column in our Sunday edition that there was a possibility of price-based selling above 5,160 and lower-end support, if the index fell below 5,118. Going ahead, the Nifty may struggle to break into the strong resistance zone in the 5,150-5200 range, while staying firm above the immediate support level of 5,050-5,000.
The market profile suggested neutral trading session on Monday. In this case, there is not much difference in the perception of value between buyers and sellers, and they are active by the range extension on either side of the initial balance (IB) range. The close was in the middle of the range, indicating a balance between buyers and sellers. For example, the Nifty October futures opened near the day’s high of 5,162 and after getting support at 5,081, it closed at 5,122.
However, the rally from the day’s low was accompanied by 52 per cent volumes below close, mostly in buy-side trades, which suggested that buyers were in control. The trade summary matrix suggested change of hands in the IB range and volume was measly around 19 per cent, indicating lack of interest among floor traders.
Going ahead, the recovery from the day’s low could lead to a strong positive opening on Tuesday. Price-based rally could take the index at 5,135, while a volume-based rise could take the Nifty October futures around 5,163, suggested the market picture chart. The first support could come around 5,087, which was also the day’s low. Major support was expected at 5,045.
The domestic equity market continues to remain with the traders and it is not prudent at this stage for strategic and retail investors to stay invested in stocks, says Moses Harding, head Global Markets Group, IndusInd Bank. It is better to stay aside for the next couple of months to get clarity on the next direction.
The increase in open interest (OI) in the 5,100-strike call options through sell-side trades suggested fresh shorts on the expectation of a fresh downside. The 5,100 put and 5,000-strike put saw change of hands — a few traders seems to have booked profit in the morning session, when the Nifty was trading higher. The fresh short expected to have build-up on account of significant recovery.