The Nifty closed below 5,300 on profit-booking, spurred by fears of a rate hike as well as weak Asian markets. In fact, sentiments took a further hit when all global markets opened in the red. However, the silver lining was that the Nifty futures maintained the support level of 5,260 and closed at 5,268 on short-covering at lower levels.
The trading pattern in the Nifty futures and options suggests the index may find strong support around the 5,200-level. Market analysts expect the weakness to continue in the short term, with a strong rally in the medium term after the announcement of first quarter results.
The Nifty July futures saw unwinding of around three million shares intraday, mostly from top traders, according to Bloomberg data. Participants were wary of trading in Nifty above 5,300 with only 21.8 per cent volume changing hands. Buying support was seen at 5,240-5,280 levels as top traders covered their short positions. According to time-price opportunity (TPO) data, the Nifty can move below 5,200, but is likely to get support at 5,180.
The volume-based support is expected at 5,212.50. The 5,300-5,500-strike calls together added 2.8 million shares in open interest (OI), mostly through a change of hands among top traders. This means big traders expect the Nifty to trade below 5,300 in the short term. Participants also expect the Nifty to trade below 5,200 as the 5,200-strike call added 144,100 shares in OI, mostly through a change of hands. However, the OI build-up in at the 5,200-strike put indicates strong support around 5,180.
Among stocks futures, Bharti Airtel, BGR Energy, IDFC and Larsen & Toubro ruled firm on short-covering and long build-up in the July futures. Bharti saw 61 per cent of the volume being struck above Rs 266.50, mostly by top traders. Price projection on the basis of volume data indicates a fresh upside of around Rs 269, while support is expected to come around Rs 264. BGR Energy gained 4.29 per cent to close at Rs 745.90. Traders covered short-positions in the July futures on expectation of a fresh upside in the near future. The TPO price projection is at around Rs 760.
Larsen & Toubro is expected to move up to around Rs 1,811, according to a price projection on the basis of TPO data.