The market could not carry on its rally on Friday after Thursday’s pullback. And, after Nifty faced selling pressure at 5,566, a southward journey began in the afternoon, which continued till the end of the day’s session. The Nifty futures revisited its 5,350-level low of August 31 last year, before recovering and closing at 5,382 on lower-level support. The SGX Nifty closed at 5,370 in over-the-counter trade, hinting at steady opening on Monday.
The key indices plunged over 2.5 per cent on Friday on profit-booking. Reliance Industries, ICICI Bank, ITC, Larsen & Toubro and Infosys Technologies dragged the index below 5,400.
We had indicated in this column on Friday that the Thursday pullback and closing above the 5,500-level could lead to an upside breakout at 5,600 if the index sustained above 5,570. The reverse could be possible if the market broke below 5,480-5,460. For spot Nifty, upside breakout was possible if it sustains above 5,555. The spot Nifty and February futures faced strong resistance around these levels on Friday and broke below 5,430-5,460 to revisit the August 31 low.
The Nifty February futures, which closed at a 14-point discount to the spot, saw unwinding of long positions in three million shares. The futures also added 2.89 million shares in open interest (OI) at close, indicating fresh sell-off in the near future. The trade summary matrix indicates change of hands and significant sell-off below 5,418. Panic selling was seen immediately after the Nifty failed to sustain the 5,440 level. In the last 30 minutes, almost 26 per cent volume changed hands.
The initial balance range (5,516-5,538) established by floor traders saw poor volumes, with lack of support at those levels. The value area (5,418-5,525) saw change of hands and 60 per cent trades. Traders sold 23 per cent shares of the Nifty futures below 5,418. The volume based sell-off may take the index around 5,317.5 in the near future. The index is expected to get the TPO-based support at 5,337.5. On the upside, the first resistance is expected around 5,418, second at 5,440 and third around 5,480.
The unwinding of open interest in the 5,400-strike put options signals fresh weakness. The traders sold the 5,400-5,500-strike call options, as they expected the market to be weak in the near future.