The Nifty futures crashed below 5,500 after losing support at 5,600, but staged a modest pullback in the end on short covering and closed above the crucial support at 5,530. We had indicated in this column that the Nifty would be weak below 5,600.
The trade summary matrix for the day suggests a cautious approach by the participants as the trading volume in the Nifty February futures was mainly through a change of hands. Short covering was seen when the index slipped below 5,521. The Nifty is expected to open on a weak note on Monday as the SGX Nifty closed at 5,485 in the evening trade on the OTC Counter of the Singapore Exchange.
Going ahead, the Nifty February futures may face strong resistance above 5,574 and if it slides below 5,521, the volume based support may come around 5,434. In other words, the upside for the market is very limited, but the fall may be more than 100 points in the near term. The floor traders or day traders are hinting at selling pressure for the Nifty in the initial balance range (5,574-5,622). The value area (5,521-5,589) saw short covering at the lower end and resistance at the higher band.
Reliance Industries, HDFC, Infosys Technologies, Larsen & Toubro and Tata Motors, the top losers in terms of contribution to the index, closed on a weak note. The market picture chart suggests a volume-based downside for Infosys around Rs 3,090, HDFC around Rs 627.50, and Larsen & Toubro around Rs 1,575.
Reliance Industries may move up marginally around Rs 939 while Tata Motors may be volatile, with support at Rs 1,087 and an upside potential at Rs 1,156. The options data suggest resistance for Reliance above Rs 950 as the February call of 950 strike has seen a 242 per cent rise in open interest. Tata Motors has strong resistance at 1,150 based on OI build-up at the February call options of Rs 1,150 strike.
The Nifty February futures settled at a 24-point premium at 5,536 and carry 20.42 million shares in open interest, up by 9.85 lakh shares. The participants built up short position at 5,500-5,700-strike call options on expectations that the Nifty may lose support of 5,500 in the near future. Strong support is seen at 5,400 based on a build-up of open interest at the 5,400-strike put options. However, the intra-day TSM chart shows buy-side trade in the 5,400-strike put when the index slid below 5,500.