The Nifty held the 5,700 support on Friday and closed convincingly above 5,800 on short-covering. We had indicated the possibility of extended weakness up to 5,640 before the pull-back. Going ahead, the Nifty is expected to move up above 5,900 with time-price opportunities (TPO)-based target of 5,947 for futures and 5,930 for spot. The volume-based resistance is expected around 5,967-5,950, the market picture chart suggests.
The trade summery matrix (TSM) suggests short-covering by big traders and change of hands among mid-sized players and retailers. There was short-covering in the value area (5,800-5,870) with 66 per cent volume and 72 per cent TPOs. The volume in the initial balance range (5,748-5,820) accounted for 35 per cent, down significantly compared to 70-75 per cent in the previous two sessions. The drop in volume in the initial balance range indicates strong support below 5,820.
Nifty December futures saw significant intraday short-covering and some long build-up above 5,820. The futures closed at a 23-point premium to the spot and shed 1.85 million shares in open interest, which indicated short-covering by the bears.
The futures now hold an open interest of 24.99 million shares, a favourable factor for the bulls to take the Nifty above 5,900. On the weekly chart, the support for the Nifty is expected around 5,680 while resistance continues to be above 6,000.
There was significant short-covering in call options above 5,800 on expectation of a fresh pull-back around 6,000. The open interest was down by 1.50 million shares in the 5,900-strike call options and by 2.08 million shares in the 6,000-strike call options. There was profit-booking in the 5,900-6,100-strike put options and fresh short build-up in the 5,600-5,800-strike put options. This clearly indicates that the market participants expect a fresh recovery.
SGX Nifty settled 11 points lower below the Friday evening close of 5,580 over the counter at the Singapore Stock Exchange. In the domestic market, though foreign institutional investors (FIIs) covered their short positions marginally, they were net sellers in index and stock futures on a weekly basis. So, a broad rally and a change in the current bearish sentiment hinge on how quickly FIIs cover their short positions in the derivatives segment.