The market fell sharply from its all-time high due to weak global cues and unwinding by strategic investors. Nifty November futures fell 275 points in the last seven trading sessions on November 16. We had indicated in our column on November 5 that the Nifty would face strong resistance above 6,350 and there was no scope for it to move up further.
Global cues and trading in the SGX Nifty suggest the market will open on a positive note tomorrow. It will continue to consolidate in the short term and the Nifty may get strong support around 5,900. The time-price opportunities (TPOs) data for November 16 are hinting at price-based support at 5,887.50. The volume-based sell-off on Tuesday is likely to take the Nifty futures around 5,877.
Nifty November futures slipped below 6,000 on Tuesday to an intra-day low of 5,975, largely due to volume-based sell-off below Monday’s low. Almost 100 per cent trading volume on Monday (22.70 million shares) was below 6,060 due to profit-booking. Bloomberg data show big traders sold and there was some short-covering from retailers. The foreign institutional investors’ derivatives data show an increase in short positions by 46,530 contracts in the Nifty futures.
The trading pattern in the Nifty futures on Tuesday is hinting at volume-based support at 5,932. The market picture chart for two trading sessions (Monday and Tuesday) is hinting at the TPO-based level of 6,230. No wonder, despite 31.17 million shares changing hands on Tuesday, the open interest in Nifty November futures remained unchanged at 24.93 million shares.
The trading pattern shows strong build-up of open interest in the 6,000-6,200 call options, mostly through change of hands. There was unwinding of short positions in the 6,100-6,300 put options while the 5,900 put options added one million shares in open interest through sell trades. This clearly indicates the Nifty may not fall below 5,900 while there are chances of moving past the 6,200 level in the near future.
The market is expected to consolidate till the end of December 2010 and prepare for reinstatement of the bull phase on shift into 2011, says J Moses Harding, head, global markets group, IndusInd Bank. Global cues continue to stay positive while changes in domestic monetary conditions provide the desired momentum. The growth momentum is a worry but not to be taken as a short-term concern as the central bank’s priority will shift from inflation to growth as we move into the new financial year. Till then, let us set our attention on consolidation at 6,000-6,300 with a bias for extension into 6,400.
