The strong recovery in Tuesday's session from a low of 5,350 was on the back of short-covering and positive global cues. The Nifty is now headed for the near-term target of 5,500, and we may see some profit-booking above this. The market is clearly in a bear grip with open interest (OI) in the Nifty September futures at 32.81 million shares, which is on the higher side. The Nifty may not travel far from the current level, unless bears go in for some short-covering. There is no genuine buying interest as profit-booking is being witnessed from index highfliers at higher levels.
As expected, the Nifty witnessed short-covering at 5,415-5,445 on account of strong cues from Asian markets and a positive opening in the European ones. A market picture shows 70 per cent of time-price opportunities (TPO) and 55.4 per cent of volume below the midpoint level of 5,450. The point-of-control (PoC) was below the midpoint. However, the Nifty came out of the trading zone around 3 pm and started trading above PoC, which indicates short-covering.
Almost 65 per cent of the volume in Nifty September futures changed hands after 3 pm with top traders being net buyers. This significant post-noon jump in volume is expected to take the Nifty to 5,548, according to price projections on the basis of trading volume. If price projections are made on the basis of TPOs, then the 50-share Nifty is expected to move up to 5,488. The September futures closed at a premium to spot and added 534,800 shares in OI. Market picture data shows significant buy-side trades below 5,440, which is expected to encourage more short-covering from bears.
There was some profit-booking above 5,465. The trading volume in the Nifty options hints at short-covering in the 5,400-strike calls and a long build-up in the 5,500-strike call. Traders booked profit in the 5,300-strike put and built fresh short positions in the 5,400-strike put. The 5,500-strike put added an OI of over 1.14 million shares, mostly through sell-side trades. This means market players are looking at an immediate upside for the Nifty above 5,500 with strong support at 5,400.
The 5,600 level remains elusive, if call options data is to be believed.