As expected, the Nifty June futures plunged below 5,300 and also tested lower-end support at 5,180 before settling at 5,260. We alerted our readers on bears’ dominance and significant weakness going into 5,180 in this column on Friday and again on Sunday. The market, thus, has achieved a correction price wise and, hence, we may see some stability coming in the next two to three trading sessions.
The Nifty put and call options data hint at stability around 5,300 and strong resistance above 5,380. The put call ratio at 5,200-strike indicates the Nifty may probably not slip below 5,200 in this series.
There were some signs of relief for the beleaguered bulls as the bears went for significant short-covering below 5,265. The Nifty June futures settled at a three-point premium to spot and added 897,500 shares in open interest (OI) through buy-side trades after panic selling below 5,265. The trading data suggest that bears expected to have covered short positions of around two million shares when the Nifty slipped below 5,230.
Based on the market picture chart (MKTP) sourced from Bloomberg, the down risk for the Nifty remains at 5,140. However, a significant recovery from the day’s low of 5,180 and close at 5,260 hints at an end of the price-wise correction.
The downside now is limited around 5,230 and volume-based short-covering can take the Nifty around 5,330. However, strong price-based resistance is seen above 5,350. The spot Nifty is expected to face resistance above 5,377 and is likely to get support at 5,193.
The options traders have covered up short positions in the 5,300-strike put and have built up significant short positions in the same strike call options. This clearly means the upside resistance for the Nifty has now moved down from 5,400 earlier to just above 5,300.
The trading volume in the initial balance (IB) range (5,330-5,380) for the first two TPO time periods of 30 minutes each, which decline to 10 per cent from over 50 per cent in the last few trading sessions, hints at higher level resistance. The value area (5,236-5,318) also saw significant sell-side trade above 5,265 and, hence, there is a possibility of an increase in profit booking above 5,330.
