The derivative participants were aggressive sellers in the Nifty futures and key banking sector stocks such as State Bank of India (SBI), ICICI Bank and HDFC Bank after the announcement of a 50 bps rate rise on Tuesday. Price-based selling was seen from top traders and short covering from small traders in the initial balance (IB) range (5,630-5,726) and value area (5,600-5,700).
The trading volume in the IB range and in the value area dropped significantly to 30 per cent (50 per cent on Monday) and 50 per cent (68 per cent) respectively, which indicate the floor traders as well as the other time-frame traders were unwilling to take positions at those levels. The lack of support in the IB range and in the value area indicates the short-term resistance level for the Nifty going ahead.
The Nifty May futures closed at par to spot and saw a long unwinding of around 2.50 million at during the intra-day trades and a short build-up of around two million shares at the close of the day. The May futures closed at the day’s low at 5,662 but some short covering was seen below 5,600. But this may not work in favour of the bulls as the weakness in banking sector stocks is expected to continue tomorrow and that can pull down the Nifty below 5,500.
The market profile continues to show a selling range extension, and hence the undercurrent remains weak. The market picture chart hints at a TPO-based resistance above 5,857 and lower-end support around 5,482. The spot Nifty may face resistance above 5,832 and is expected to get strong support below 5,472. The Bank Nifty is expected to face strong resistance above 10,990 and lower-end support is seen around 10,470.
Among the key banking stocks, State Bank of India is expected to face strong selling pressure above Rs 2,657 while the volume-based support may come around Rs 2,450. ICICI Bank is likely to see support at Rs 1,020 and resistance above Rs 1,080.
The options traders expect strong resistance for the Nifty above 5,800 as they raised short positions in the 5,800-strike call options. The put options data hint at a fresh short build-up at the 5,600-strike put options and, hence, the Nifty may face significant selling pressure above that.
