As indicated in this column, the Nifty closed above 5,800 on short-covering and strong buying in banks and technology stocks. The volume chart indicates a fresh upside for the Nifty at around 5,862. However, time-price opportunity (TPO) data indicates profit-booking in index and stock futures and possible trading below 5,800 with volume-based support at 5,767.
The index is expected to get TPO support at around 5,737. But the healthy volumes in the Nifty September futures over the last three trading sessions hint at the possibility of the Nifty closing above the 5,900 level in the near future. The Nifty September futures moved in a narrow band and saw 90 per cent of the traded volume being struck above 5,800, mostly through buy-side trades. However, the Nifty could not move out of the initial balance range – the first two TPO periods – provided by liquidity suppliers.
The Nifty futures were trading at a discount in the morning session with almost 15 per cent of the volumes on the sell-side, indicating a short build-up from bears. However, the discount disappeared in the post-noon session as bulls built up long positions. In the end, the futures closed at a premium and shed 1.43 million shares in open interest (OI), which shows some short-covering.
According to the trading pattern in call options, the support level is projected to move up to around 5,800 for the 50-share index, as put options traders built up fresh short positions of 1.07 million shares in the 5,800-strike put. The 5,800-strike call saw unwinding of short positions. However, traders may find it difficult to protect the 5,800 level as the OI in the 5,800-strike call has been significantly higher than that in the 5,800-strike put. Also, participants booked profits in several key stocks futures like Tata Motors, Reliance Industries, ICICI Bank, State Bank and Tata Steel.
But the key stock futures do not promise fresh upside if one goes by TPO projections. Infosys Technologies, HDFC Bank, State Bank, ICICI Bank and several other stocks' futures closed within the value area and their prices remain around the initial balance range. This means buyers are getting fatigued and, hence, we expect profit-booking in the coming session.
ITC closed on a strong note and TPO data projects a price above Rs 170 in the near future. HDFC Bank may see price level of Rs 2,395 soon.
