The market undercurrent turned weak on Monday as the Nifty July futures closed below the value area (5,572-5,596) after moving within the previous value range for the major part of the trading session. The trading volume declined sharply by 6.35 million shares as participants are wary of taking position on either side on account of being range-bound in the last three trading sessions. So, the immediate support for the Nifty is seen at 5,500, and if it breaks below the level, the next support is seen at 5,460-5,430. The July futures has faced strong selling pressure above 5,590 in the last two consecutive sessions and, hence, it can act as a resistance level for the market.
Nifty July futures moved between resistance and support and closed in the red, as other time-frame traders stepped in and started selling in response to price above value. The futures closed at 5,569, with only 6 per cent volume below that level, which indicates unwinding of long positions. The trade summary matrix (TSM) data hints sell-side volume above 5.591 and selling pressure from top traders below 5,580. The Nifty has been facing strong resistance in the initial balance (IB) range in the last three consecutive days, on account of selling pressure from other time-frame trades. So, it is important for the Nifty to close above IB for the positive bias.
The futures settled at 5-point premium to spot, and shed 505,850 shares in open interest (OI) through significant sell-side bias above 5,591. The futures settled around the day’s low, which indicates unwinding of long positions by bull operators. The market picture chart indicates that price-based selling pressure from the day’s high of 5,609 can take the July futures around 5,521-5,507. The spot Nifty may see support around 5,502, and an upside resistance around 5,590.
The trading pattern in the Nifty 5,600-strike call and put options indicates a tug of war between bulls and bears. The bears have been adding significant short positions in the 5,600-strike call options (aggregate OI at 7.93 million shares), while bulls also increasing OI positions in the 5,600-strike put options (aggregate OI at 6.80 million shares) despite the Nifty has failed to close above 5,600 in the last six trading session. This means both bulls and bears see a strong consolidation around this level, before breaking out of the trading channel.