As expected, the Nifty staged a sharp rebound at the lower end support of 5,200 to the day’s high of 5,285 on short-covering in the value area (5,220-5,265) and below 5,220. But the futures closed at 5,230 on account of selling pressure at the higher level. The volume in the Nifty February futures remained high, but open interest in Nifty futures remained unchanged. That was the only positive signal for the market and so we can hope for some stability in the near future.
However, the significant short build-up by foreign institutional investors (FIIs) in index futures may delay the recovery. In the last five trading sessions, their open interest in index futures has increased by 148,413 contracts, or Rs 6,680 crore, through sell-side trades, according to the derivatives statistics as on February 9 provided by the National Stock Exchange. But, good news is that the Nifty February futures closed at a premium to the spot once again.
The trading pattern in the Nifty February futures showed strong resistance above 5,265 and strong consolidation in the value area (5,220-5,265). The volume in the initial balance range (5,240-5,285) saw change of hands and some selling. There was buying around 5,220 and hence the break of 5,220 could lead to a fresh weakness into 5,180. The intraday fall from the high of 5,285 is expected to be arrested around 5,202 and volume-based buying may come around 5,177.
The trade summary matrix (TSM) indicates buy trades in the value area (5,268-5,328) and below the lower band of the value area. The February futures, however, saw strong selling pressure above 5,328. The Nifty February futures settled at a 10-point discount to the spot and added 388,950 shares in open interest, mostly through sell trades at the higher level, indicating short build-up. TSM data show buy trades in the initial balance range (5,301-5,265), which indicates some short-covering by bears.
The market picture chart for the three trading sessions indicates time-price opportunities and volume-based support for the Nifty February futures around 5,140. The spot Nifty is expected to get support at 5,131. In case significant selling pressure emerges, the fall will get arrested around 5,071.
Put and call options data show unwinding of short positions in the 5,300-5,600-strike put options. There was change of hands in the 5,100-5,200-strike put options, which indicates consolidation around those levels.