The Nifty closed above the crucial support (5,460) after reacting sharply to the Japan earthquake news. The recovery from the day’s low of 5,418 to 5,464 was very strong and accounted for 66 per cent of day’s volume. Reliance Industries and Tata Motors closed on a strong note while banking and IT services stocks were weak. The trading volume in the Nifty March futures rose sharply due to distress selling after earthquake news and short-covering at lower levels. The trading data suggests buying below 5,460 and selling pressure in initial balance range.
The trade summary matrix (TSM) data indicates selling pressure in initial balance (IB) range in the last two sessions and no follow up support below lower band of that range. The IB range is a period of price exploration by day traders who go looking for the big commercial orders. However, the market never rallied above the IB range (5,480-5,515) and hence Nifty faced strong selling in that range. The value area (5,445-5,500) accounted for 65-70 per cent TPOs and volume mostly change of hands, indicating consolidation at those levels.
The Nifty March futures opened below the value area in the last two sessions and after moving down considerably to around 5,413, the index was able to close within the value area on short-covering. Interestingly, after staging a smart recovery the Nifty futures closed above value area and also the IB range with significantly higher buy-side volumes. A close within value area and IB range suggests a balanced market and so there is a possibility of responsive buying coming in.
The Nifty futures is expected get support at 5,380 and resistance at 5,520. The spot Nifty is likely to face resistance at 5,482 and most crucial support at around 5,390. The Bank Nifty is expected to move in a narrow band with a volume-based resistance at 10,825 and TPO-based support at 10,675. State Bank of India may get support at 2,540 and face resistance at 2,617- 2,637. Among other stock futures, Reliance Industries is expected to see strong upside at 1,015.
Long build-up was seen in the 5,400-5,500-strike call options and short-covering in the 5,400-5,500-strike put options. The participants also bought 5,100-5,300-strike put options to hedge long positions. The open interest data in put options hints at strong support at 5,380-5,400.
