The Nifty July futures closed above crucial resistance at 5,680 on account of positive outlook for the Indian market, after the government on Friday gave its consent to the BP-Reliance deal. The trade summary matrix (TSM) data points out short covering from other time-frame traders when the July futures moved above 5,680.
The futures faced strong resistance at 5,700 as participants preferred to take profit at a higher level. According to Moses Harding, head global markets group, IndusInd Bank, RBI’s neutral stance on rates to support growth and the FII’s interest in the emerging markets will bring in a rally at over 5,680.
The buy-side volume in the initial balance (IB) range (5,616-5,656) indicates short covering from floor traders and price extension above the previous day’s value area, hinting at initiative buying from other time-frame traders. The Nifty will move above 5,700 now, but may face resistance at 5,740. The market picture chart, however, hints at a volume-based upside around 5,762, and price-based support at 5,590.
The spot Nifty is likely to get support at 5,777 and face resistance at 5,733. However, the range bound is expected in the next three trading sessions on account of expiry of the July series on the 28th.
The July futures settled at 5,690, a 10-point premium to spot and shed over two million shares in open interest (OI), mostly through buy-side trades. The August futures settled at 5,706 and added 2.16 million shares in OI, indicating a rollover of long positions.
The options traders were bullish, and, hence, covered short positions in the 5,700-5,800 strike call options when the futures moved above 5,700. Participants have been hedging long positions through buy-side trade in the 5,600-strike, and are taking a bullish outlook as they increase OI in 5,700-strike put by 3.17 million shares through sell-side trades.
Among stocks futures, Reliance Communication (RCom) and Bharti Airtel saw significant short covering. Bharti saw unwinding of 1.91 million shares in OI due to short covering after the company announced an increase in pre-paid rates by 20 per cent. The upside for Bharti is very limited now, but the support is seen at around 408. RCom closed above value area with 40 per cent volumes above the upper band of value area (106). The MKTP chart hints at volume-based rally around 118.75.
