The Nifty August futures opened below 5,430 in the morning session without much struggle and moved below 5,400, amid concern that a faltering US recovery may stall global growth.
The August futures moved back to immediate support at 5,430 on account of poor volume and short covering below 5,400. The spot Nifty closed marginally above 5,400 and, hence there is a strong possibility of testing extended support at 5,350 in the near future. According to Moses Harding, head (global markets), IndusInd Bank, the overall market will stay tuned to near-term range of 5,350-5,550.
The trading pattern in the August futures below 5,400 suggests a modest downside around 5,375 in the near future. The August futures saw significant volume-based buying range extension from the day’s low of 5,386 to a high of 5,436.
There was strong consolidation in the range of 5,400-5,415 with 50 per cent volume changing hands, mostly through buy-side trades. The profit booking from small traders was seen above 5,415, but the big traders were active buyers above that range.
The pullback from the day’s low accounted for 80 per cent volume and can set the stage for a marginal recovery tomorrow. However, resistance is expected to come around 5,480.
The trend is likely to remain weak in the immediate future, as there has been no violation of any important levels on the upside. The market picture chart for the past three trading sessions is hinting at a significant fall at 5,243 if the 5,350 level is broken. The Nifty is likely to face strong hurdles at 5,480-5,550-5,600 on the upside. Options traders expect the Nifty to stay below 5,400 in the near future and, hence, they have increased short positions in 5,400-strike call options by 1.23 million shares and covered short positions in the same strike put options. The buy-side volume was seen in the 5,300-strike put options which indicate hedging of long positions in August futures.
The key stocks futures that dragged the index down are expected to see some more correction in a day or two. ICICI Bank is expected to see a volume-based decline to around 991 and price-based resistance above 1,025. Larsen & Toubro is likely to move down to around 1,601 and to face resistance above 1,665.
