As expected, the Nifty closed above 6,000 on short-covering by futures and options (F&O) participants. However, both benchmark indices moved in a narrow band on lack of buying at higher levels. The trading in Nifty December futures and key stock futures such as State Bank of India, ICICI Bank, Tata Steel and Reliance Industries remains within a narrow range. The volume in index and stock futures declined around six per cent as participants preferred to stay away from the market after the Nifty started trading convincingly above 6,000.
The market picture chart for the trading session is hinting at a narrow band movement in Nifty futures tomorrow. The value area (5,995-6,025) in Nifty futures has fallen within a 30-point range with volume and time-price opportunities (TPO)-based time period accounting for 75 per cent and 85 per cent trades, respectively, in that range. The initial balance range saw 95 per cent volume and TPO time periods within a 30-point band. This indicates the market players have been cautious and want consolidation at the current level as the index has already risen over six per cent in just four trading sessions since Friday.
The price movement and volume in Nifty futures suggest an index level of 6,030-6,060 with a marginal correction around 5,975, Bloomberg data suggest. The spot Nifty is expected to surge around 6,035 with a downside of 5,975. Nifty December futures closed at an 18-point premium to the spot and added 817,000 shares in open interest, mostly though buy trades in the value area and the initial balance range established by liquidity providers.
The trading in call and put options suggests strong support for the Nifty above 5,900 while resistance is expected to be above 6,050. There was short-covering in the 5,900-6,000-strike call options and significant build-up of long positions in the 6,100-6,200-strike call options. The 5,800-5,900-strike puts saw a significant addition in open interest through change of hands, which indicates that traders are hedging long positions in the Nifty by buying puts.
The 6,000-strike put options added 1.28 million shares in open interest with an equal numbers of buy-sell trades.