The short-term sell-off due to the bribe-for-loan scam is expected to end around 5,650. After this, the Nifty is likely to be rebound around 5,905.
Going ahead, futures and options (F&O) participants are expecting a minor correction from the current level and strong support for the index around 5,600. Domestic cues are not encouraging while global ones are mixed. Hence, the markets do not possess the necessary momentum to take the Nifty around 6,000 immediately.
Nevertheless, Nifty December futures saw short-covering of around 2.20 million shares below 5,800 by top traders while retailers preferred to move out of the market by unwinding long positions. There was also short-covering by liquidity providers around the price range (5,775-5,800) established during the initial balance range (the first two TPO, or, time-price opportunity, periods). However, liquidity providers were net sellers in Nifty futures above 5,800 and that led the futures to the day’s low of 5,727.
Nifty fell for four consecutive days and on Friday broke below the 5,700 mark. However, it recovered to close around the volume-based support at 5,750. The December futures closed at 5,778 and shed one million shares in open interest through buy trades at the lower level.
The market picture chart is hinting at a TPO-based price level of 5,905 while volume-based resistance may come around 5,885. The last 90 minutes volume-based sell-off in December futures from around 5,850 to 5,761 may take Nifty futures around 5,695 in the near future. The SGX Nifty at the OTC Exchange closed above 5,800 on Friday evening, which indicates a positive opening on Monday.
There was significant build-up in 5,800 to 6,100 call options and 5,300 to 5,600 put options of the December series.
However, build-up of open interest in 1.22 million shares in the 5,800-strike call options was mostly through change of hands and short-covering and so Nifty is expected to trade above that level in the near future. In this series, 6,000 call and 5,600 put options have the highest open interest. This suggests the range of the market has shifted downwards.