The Nifty has pulled back from a low of 4,942 to above 5,100 with support from positive global cues and short-covering. The index today closed at 5,144. Technically, the V-shaped pullback should have halted at around 5,090, but excessive short-covering saw the index close at the 5,144 level. However, the December futures changed hands at the 5,096 level, indicating there were few takers at higher levels.
The Nifty December futures closed at a premium to the spot and shed 2.06 million shares in open interest (OI), indicating profit-booking at higher levels. The January futures added 2.07 million shares in OI, mostly through a blend of buy and sell orders. The Bloomberg data show that participants were building long positions in the January futures when the Nifty was trading below the 5,050 level. The creation of short positions was seen above the 5,130 level. This means, the Nifty would find it difficult to close above the 5,182 level going forward.
Avinash Gupta, vice-president (research) at Bonanza Portfolio, said the market moved up on the back of short-covering by bears and building up of fresh longs by bulls. The perception that the global economy is recovering faster-than-expected triggered buying. There was a sharp rise in volumes in derivatives as well as cash segments. The number of shares advancing was far more than those declining.
The market is likely to see significant resistance around the 5,200 level. It may move in a range of 5,000-5,200. Options traders were seen booking profit at 5,100 and 5,200 strike calls, as they believe the pullback above the 5,100 level may not be sustainable. 5,000 and 5,100 puts of the December series together added 3.3 million shares in OI, which indicate that the Nifty may hover around 5,000-5,100 in the near future.
