As expected, the Nifty closed below 5,420 on weak global cues and a long unwinding in the August futures as well as the 5,300-5,400-strike calls in the final hours of trading. We had indicated a possible breakout below 5,420 in our Sunday edition as we had seen an uninspiring trading volume in the derivative segment and some unwinding in the 5,300-5,400-strike put.
The Nifty is now set to close below 5,400 in the near future with volume-based support expected to come in around 5,349. The time-priced opportunity (TPO) data suggests a Nifty level of 5,401 on Thursday. The fresh build-up of open interest (OI) in the 5,300-strike put suggests support at around 5,300.
The Nifty August futures closed at discount to spot and added 867,150 shares in OI, indicating a build-up of short positions. The futures now hold an OI of 33.41 million shares, which is significantly higher for the bulls to take over control from bears for an assault.
The August futures slipped on Wednesday from the trading zone and closed below the value area (5,422-5,452) on weak opening of European markets and the decline of over 100 points in Dow Jones Futures. The situation aggravated in the last 45-minute session with the price and time action moving below the midpoint level.
The TPO price projection, using the last 45-minute session’s data, is at 5,378, while volume-based support may come in at 5,393. Overall, the bears covered some short positions around the value area and below the 5,422 level, according to Bloomberg data.
On the options front, participants built up over a million shares in OI in the 5,400-strike call, mostly through sell-side trades. They booked profit in the 5,500-strike call and built up short positions in the 5,600-strike call. This indicates that the index is poised to move below 5,400 and may face resistance above 5,460.
Among stocks futures, Tata Motors achieved our target and closed at Rs 1,001 on a long build-up. The market picture chart shows that 90 per cent of trading in the August futures of Tata Motors in the value area (Rs 960-990) was mostly buy-side trade. The futures added 862,000 shares in the August series and 642,500 shares in the September series as participants expect fresh upside movement in Tata Motors. The TPO data indicates a price level of Rs 1,037, while volume-based target is expected to be around Rs 1,047.