The Nifty moved in a narrow range on Friday and closed at its support level due to a lack of interest from participants on weekend considerations. Monday’s opening is expected to be listless, as the SGX Nifty (in Singapore) did not react sharply to RBI’s decision to increase rates.
Nevertheless, the Nifty is expected to see resistance above 5,310. The support level is expected to be around 5,220, and bears will regain their hold only if the 50-share index slips below 5,180. There is no question of a modest recovery on strong domestic fundamentals. The only concern is that the spot Nifty closed below its crucial support level of 5,250. Technically, the Nifty has ended the week in red and this may reverse short-term trends in favour of the bears.
Foreign institutional investors (FIIs) in the derivative segment have ended up with a short build-up and profit-booking at higher levels. The FIIs seem to have covered short positions at lower levels and have gone short at higher levels, too. It is possible that the FIIs’ build-up in the index futures is a blend of short and long positions. FIIs continued to be net sellers in the stocks futures and also booked profit during the week ended July 2. They also built up significant open interest (OI) in index options, indicating a hedging of short as well as long positions.
The Nifty July futures closed at a 17-point premium to spot on Friday and shed 585,950 shares in OI, which indicates short-covering. The Nifty now holds quite strong above 5,250 as 84 per cent of the traded volume changed hands above this level. The point of control area (5,260-5,275) saw 47 per cent volume, mostly through change of hands from top trades. Traders who play on time-price opportunity (TPO) see resistance above 5,282, while volume players expect the Nifty to top around 5,302.
The 5,300-strike put added significant OI through change of hands among top trades, indicating resistance above 5,300. The 5,400-strike call saw buy-side trades, mostly from top trades, indicating a hedging of short positions. The 5,100-strike put continues to add OI through sell-side trades, while a change of hands was seen in the 5,200-strike put.
The Nifty is expected to revisit the 5,300 level as the 5,300-strike put added significant OI, mostly through sell-side trades. The 5,200-strike put holds maximum OI and, hence, a strong support base.
