Mkt check: Profit booking may continue

The foreign institutional investor spoiled the bull's party yesterday with net sales of Rs 1,450 crore in the cash segment on the BSE and NSE.

The derivative trading data on NSE suggest that FIIs preferred trading rather than going long or short. The 50 points premium in Nifty December futures suggest that FIIs were selling derivatives when the Nifty was trading above 5,800 and covering them at around 5,700 odd levels, which is why the Nifty futures were trading at high premium through out the day.

The FIIs were net buyers of index futures worth Rs 450 crore yesterday, the first time in the current month series, while squaring off all transactions on stocks futures.

The short covering at the end of the day helped the Nifty and Sensex to close above support levels. The opening bells for the Asian markets were mixed and hence the Indian markets likely to see a positive start.

At the same time, profit booking is likely to continue at higher levels as the FIIs are in sell mode on account of a week long holiday owing to Christmas and the New Year.

According to Deepak Singh, this is after a long time that the bears are making their presence felt at support levels. Normally, they apply pressure near resistance areas only. But thanks to FIIs selling, the support zone are also getting shaken. But despite all the pressures, Nifty is holding on to the 50-days moving average.

"The way Nifty came back after breaking below 5,700 yesterday and then closed just above 50-days moving average, you need to go with bulls. But that does not mean one can go extremely positive on the market. The way support zone has been shaken, bulls will have to do lots of work to bring back the confidence. The inability of the market to bounce back strongly from support is making lot of people nervous. This cannot be called as strong market.", he added.

Trading rule - When market bounces from support, it travels to resistance to test its strength. The resistance is now at 5,880. Nifty should now make an attempt to reach this level in next few days.