The Nifty maintained the 5,220 support level and closed above 5,300 on a strong opening in European markets. Going forward, the Nifty faces strong resistance above 5,350. A close below the support level would have weakened the bullish argument for the Nifty, but sentiments changed in favour of the bulls on account of the smaller-than-expected three-month tender issued by the European Central Bank. This eased European banks’ funding issues.
The Nifty July futures closed at a premium to spot and added 2.8 million shares during intraday trade, mostly due to buy-side orders from top traders. However, at close, the open interest (OI) increased by 1.64 million shares, indicating short-covering from bears. According to Bloomberg data, there was short-covering and fresh long build-up from participants, too, around the value areas of 5,250-5,300, which represented a price and volume of 65-70 per cent. Top traders executed buy orders in the Nifty, even above the 5,300-level, mostly to cover their short positions.
The participants covered short positions in the 5,300-strike call and sold the 5,400-strike call options.
Trading in call options as well as the time-price opportunity (TPO) data indicate that the Nifty has very little scope to move above 5,370. According to TPO and volume data, price resistance is expected at 5,345. However, the OI build-up in the 5,200-strike put indicates strong support for the Nifty above 5,200.
Among stock futures, ITC, Reliance Industries and Larsen & Toubro look stronger on a market picture chart. Reliance Industries is expected to move around Rs 1,116 based on TPO, and around Rs 1,129 based on volume projections. The price projection for Reliance is based on a strong, 62 per cent volume above Rs 1,088. The July futures closed at Rs 1,093.25 and added 712,750 shares in OI, indicating a long build-up.
Larsen & Toubro ruled firm and closed above the Rs 1,800-mark, as indicated by a TPO chart. The stock is expected to move up further with a price target of Rs 1,841 in the near future. ITC, too, closed above Rs 300 and has achieved the TPO target of Rs 306 on a long build-up above Rs 304. The TPO and volume data indicate a price target of Rs 316.25 in the near future.