The Nifty managed to surpass 5,110 and close at 5,118 despite thin volumes in the futures and options (F&O) segment. Going forward, the Nifty has strong resistance at 5,150. So, till this is crossed, we expect the index to face selling pressure. The selloff that is seen above 5,150-5,200 is expected tomorrow if the Nifty crosses these levels.
Already, the Nifty October futures have started trading at a discount to the spot, indicating some short build-up at higher levels. Bloomberg data indicated that long traders booked profit when the Nifty started trading above the 5,110 level.
According to a technical analyst at JM Financial, a perfect rebound from the trendline support (4,910) on Monday cancelled the bearish pattern that had formed on the hourly chart. On the contrary, the indices seemed to have confirmed a breakout from a bullish “Flag” pattern that should take the Nifty towards 5,200 in the short term. Most technical studies are close to the oversold zone and hence will support any further rally. The trading pattern in the Nifty options suggests that the index has strong resistance at the 5,200 level as this strike call added 366,050 shares in open interest, mostly through sell-side trades.
The key benchmark indices surged for the second day in a row on strong global cues and better-than-expected second-quarter numbers by financial sector companies. The strong buying in index heavyweights such as State Bank of India, Reliance Industries and Tata Steel also lifted the Sensex and the Nifty to new 52-week highs. The October futures of State Bank of India rose 5.4 per cent on short-covering as well as fresh long build-up of 187,968 shares. Reliance Industries witnessed profit-booking as its October futures closed around Monday’s level and shed 32,700 shares in open interest.
