The Nifty closed below 5,400 for the first time this month, led by Reliance Industries and surging oil prices. The derivative participants sold shares in the initial balance range (5,420-5,505) and did some value buying in the value area (5,390-5,450). The trade summary matrix (TSM) data indicate selling pressure above 5,420. The market, however, is likely to open on a positive note on Monday as the SNG Nifty closed higher at 5,415 on the Singapore Stock Exchange.
Meanwhile, on Friday, the Nifty March futures saw responsive selling as it opened within Thursday’s value area (5,470-5,510) and made an attempt to trade above the value area. Taking advantage of high prices, sellers entered the market thereafter and took the price back into the value area. The Nifty went sideways and closed below 5,400 at 5,373 as selling pressure continued in the value area.
The initial balance range, the first two TPO time periods, saw 32 per cent volume and 34 per cent TPO counts, which indicate a lack of support at those levels. The value area saw some buy-side bias and a significantly high volume, which indicates short-covering at those levels. The TPO counts below the Point-of-Control (PoC) increased sharply to 68 per cent, suggesting strong selling activity and a net selling day.
The Nifty March futures closed at a premium to spot and added 836,750 shares in open interest through buy-side trades below 5,420, the TSM data suggest. However, the selling pressure from the day’s high of 5,502 to a low of 5,380 expected to take the futures around 5,325, the TPO data indicate. If the selling pressure continues even at that level, the volume-based sell-off is expected to end around 5,273.
The futures today closed below the crucial support level of 5,440 and even the volume above that level was a dismal 15 per cent. So, any upside is likely to be terminated around 5,440-5,460. The spot Nifty is likely to see a volume-based sell-off around 5,305. The Bank Nifty is expected to face strong resistance around 10,890 and is likely to get support around 10,670.
Options traders built up short positions in the 5,300-5,500-strike call options on expectation that the current weakness is likely to continue for some more days. The 5,400-strike call options added 2.11 million shares in open interest through sell-side trades, indicating a resistance level for the market going ahead. Short-covering was seen in the 5,400-5,500-strike put options and also 5,300-strike call options as the participants expect the Nifty to remain below the 5,400 level.