The Nifty slipped below 5,800 and closed at the day’s low of 5,785 on lack of buying even at the lower level. The Nifty April futures, too, closed below 5,800, as traders preferred to book profits. The trading volume in the April futures remained moderate at 15 million shares.
We had indicated weakness in the market and had hinted at a fresh sell-off if the Nifty closed below 5,850. The market picture chart based on the last two trading sessions (Friday and Monday) suggests fresh weakness and net-selling day, as the TPO counts above the point of control (PoC) – area of most traded price – were greater than the lower portion of PoC.
The market picture chart points to a price-based resistance above 5,845. The volume-based support for the Nifty futures is seen at 5,757 and the volume-based sell-off at that level can take the Nifty around 5,667. The spot Nifty is expected to get strong support at 5,737 and fresh sell-off can take it around 5,667.
The Bank Nifty is expected to face resistance around 11,675 and to get strong support at 11,475. April futures of State Bank of India may face resistance at 2,800, while buying support is seen at around 2,755. Reliance Industries is expected to face resistance around 1,045, while support is seen at 1,000.
The value area (5,806-5,832) saw 72 per cent volume and 67 per cent TPOs, indicating price-based short covering. The Nifty on Monday opened above the value area, but closed below the value area on account of responsive selling from floor traders. The basic significance of a market trading outside the value area is that of an out of balance market where the value area is being rejected. When the market is above or below the value area it is showing us that either the longs or shorts are currently attempting to influence the market.
The options traders covered short positions in 5,888-6,000-strike put options, as they expect the Nifty to trade below 5,800 in the near future. The 5,700 put options added 342,300 shares in open interest mostly through change of hands and buy-side trades which indicate hedging of long positions in the Nifty futures. The fresh positions was seen in the 5,800 call options and profit booking at 5,900 call options as participants expect the market to remain weak in the near future.
