The Nifty August futures closed in the green on short covering by participants after gap-up opening, on account of strong global cues. The August futures settled at 5,159, up 1.7 per cent, as traders covered short positions on 3.4 million shares when the index was trading below 5,150. Going ahead, a possible third round of quantitative easing in the US by the month end would support global bourses. That could take the index to 5,350-5,500, says Moses Harding, head, global markets group, IndusInd Bank. Add-on support for the Indian equity market will be a stable interest rate regime and possibility of extension into 5,700 in the near future.
The trading pattern in August futures suggests strong support below 5,100 and resistance above 5,212. The trading volume declined sharply compared to Tuesday’s session, as floor traders chose to book profit in the early session. Short covering was seen below 5,150 and strong selling pressure was evident above that level. The market moved in a narrow band after gap-up opening, indicating a non-trend day. This formation involves the day trader more than the other time-frame trader. The market is said to be at balance in a non-trend day, often a precursor to a new vertical move.
However, the August futures closed at the lower band of the initial balance (IB) range (5,146-5,192), which accounted for 82 per cent volume, mostly through change of hands. The buying in IB range was seen below 5,165 and selling pressure above that level. The market picture chart had multiple points of control (PoC) in the price range of 5,154-5,170, which indicate consolidation around that level. So, for a new vertical move, the Nifty has to close above 5,170, with strong volume. The market picture chart is hinting at an up move around 5,212 and support around 5,080. However, the pullback in the last two trading sessions is expected to take the index around 5,315, the MKTP chart suggests.
Nevertheless, the short covering in call options above the 5,300-strike price and fresh short build-up in the 5,100-5,200-strike put has changed the market sentiment from negative to positive. The MKTP chart hinting at a fresh rally in key stock futures fuelled Wednesday’s rally. Among stock futures, a significant up-move is likely for Infosys Technologies (price target of Rs 2,490), HDFC Bank (Rs 500), ICICI Bank (Rs 1,003), Tata Motors (Rs 898) and State Bank (Rs 2,355).