The Nifty saw profit-booking above the 80 per cent retracement level of 5,060 and closed at 5,058. This is the last chance for the index to retrace to its October high of 5,181. If it fails, we may see a mild correction.
However, benchmark indices are well above short- and medium-term moving averages, which suggest the market is bullish. Overall, the indices look set to rise further and test the short-term target of 5,130 for the Nifty and 17,200 for the Sensex.
Though the Nifty November futures closed above the 80 per cent retracement level of 5,060, the trading volume dropped almost 35 per cent, indicating lack of interest at higher levels. The futures moved in a narrow band of 40 points and added 66,700 shares in open interest despite an intra-day build-up of 1.55 million shares, indicating profit-booking by traders.
Bloomberg data suggest that almost 31 per cent volume in Nifty futures changed hands in the last one hour, mostly through sell-side trades, at an average of 5,063. This means the index has strong resistance above 5,060. So, if selling pressure continues, we may see a mild correction that can take the Nifty to 4,860.
Options traders booked profit at 4,800-5,000 calls and wrote 5,100-5,200 calls. This means traders expect a narrow movement with strong resistance above 5,100. The 5,100 put options saw a spurt in volume (33 per cent of total trades) in the last one hour, mostly through buy-side trades, indicating resistance.
The 5,000 put changed hands in the morning and there was put-buying in the closing session, indicating short build-up. Traders wrote 4,900 put as they expected strong support at this level.
