The rally in the stock market lost steam after the Nifty faced strong resistance above 6,210. In fact, the 50-scrip index fell through 6,100 on Friday, before finally managing a slightly higher but still a weak close of 6,103. Though the support level of 6,100 has been maintained, the close below 6,120 is a concern. However, global cues and a close of 6,166 for the October futures of the SGX Nifty suggest a positive opening for the market on Monday.
The Nifty October futures closed below 6,147 on long unwinding and is expected to bring fresh weakness in the market next week. The volume picture data, however, indicates that October futures may not fall below 6,090, while the time-price opportunities (TPOs) data hints at an upside of 6,190.
It seems the market will now go into a consolidation mode within the 6,025-6,175 range, with overshoot limited to 6,220 till the Coal India initial public offer (IPO) is out of the way, according to Moses Harding, head (global markets group), IndusInd Bank, Mumbai.
There was also a fear that foreign institutional investors (FIIs) may close out on existing investments to create room for investments in the large-ticket Coal India IPO. However, the flow of “hot money” into the Indian stock market seems to be sustainable for a long period.
The only consolation for the bulls has been the considerably high premium for the Nifty October futures, despite the unwinding of over two million shares in open interest (OI) last week. This indicates bulls continue to hold significant long positions, while bears have started covering short positions. The trading pattern in the Nifty futures for the week ended October 8 hints at strong resistance for the market above 6,180, while support is expected to come around 6,050. Moreover, if the market improves after consolidation, the weekly TPO data indicates a price target of 6,330 for the Nifty.
Among stocks futures, Reliance Industries (RIL) and Reliance Communication (RCom) are expected to be move up further from current levels. RIL closed above the weekly value area on account of short covering. The weekly TPOs hint at a price level of Rs 1,092 with volume-based resistance at Rs 1,084. RCom is expected to show a strong move above Rs 182 with a TPO target of Rs 189.