The Nifty closed in the red on the first day of the August series on negative cues from weak global markets and a lack of interest at higher levels. According to market picture data, top traders booked profits on Friday on account of the weak opening in European markets. The data also shows support for the Nifty at 5,350 and resistance above 5,427.
The market is now expected to open on a steady note on Monday as global markets closed in a Doji Pattern, while the SGX Nifty closed marginally higher at 5,387 at the over-the-counter facility of the Singapore Stock Exchange.
On Friday, the Nifty closed below the value area (5,345-5,380) with 22.4 per cent of trades changing hands through sell-side trades. This indicated an unwinding of long positions. The down side moves in the Nifty accelerated after 2 pm and almost 95 per cent of the traded volume changed hands below 5,395.
The market picture chart shows short-covering from traders, initially around 5,390, and unwinding of long positions in the final 30 minutes of trade. The fag-end selling is likely to take the Nifty to around 5,350, according to time-priced opportunity (TPO) data.
The Nifty August futures closed at the day’s low and added 1.57 million shares in open interest (OI), which hints at a build-up of short positions. The trading volume in the puts and calls suggests that the Nifty may face strong resistance above 5,400. Participants bought 5,500-5,600-strike calls on expectations of a fresh bull charge, if the Nifty closes above the recent high of 5,477. However, they were buying in the 5,000-5,200-strike puts to protect their long positions at current levels.
According to IndusInd Bank Head (Global Markets Group) Moses Harding, the stock markets will be the worst hit by the hawkish stance of the Reserve Bank of India (RBI), as the easiest way to generate cash is through exit of stocks. Domestic investors – retail as well as institutions – will be in sell mode to divert cash into interest-bearing fixed income products to enjoy the time value, at least till more cues emerge that indicate a reversal in equities.
