The market maintained Tuesday’s up move on the back of a sustained responsive buying in index futures and key stocks futures like State Bank of India (SBI), ICICI Bank, Reliance Industries, Infosys Technologies and ITC. We had indicated in this column on Tuesday that the Nifty may move up around 5,480. The Nifty March futures on Wednesday consolidated around that level and closed above 5,500 on account of strong responsive buying in the derivative segment. Responsive buying occurs when the market opens below the value area and buyers immediately start entering the market.
The Nifty futures saw responsive buying as it opened below the value area, but prices moved up higher as buyers respond to price below value area. The trade summary matrix (TSM) data sourced from Bloomberg, saw more than 80 per cent volume above the previous day value area (5,440) in index futures and key stocks futures. The market has also given a strong bullish signal to trading activity in the derivative segment indicating buying range extensions. A buying range extension is a fairly strong breakout type of signal.
Derivative participants sold shares in the initial balance (IB) range (5,415-5,480). However, that did not impact the positive sentiment as volume in the IB range remained subdued around 35 per cent. There was a significant price-based short-covering in the value area (5,454-5,498) with strong volume and time price opportunities (TPOs). The buy-side trades were significantly higher when the index breaks out of the resistance zone of 5,460-5,480. No wonder, the Nifty March futures saw unwinding of around 2 million shares in open interest (OI) from the intraday level.
The market undercurrent remained positive as the Nifty closed above value area of the day. The key stock futures such as SBI, ICICI Bank, Reliance Industries and Infosys Technologies closed above value area after opening below Tuesday’s value area. The price projection using TPOs and volume picture chart suggest target of 5,555 and support at 5,460. The spot Nifty is likely to move up around 5,532. The Bank Nifty is expected to move up around 11,115-11,135 and to get support around 10,950.
SBI is expected to move up around 2,679 and get support below 2,640. ICICI Bank is likely to move up around 1,064 and get strong support at 1,030. Reliance Industries is expected to see fresh upside around 1,026.
Options traders covered short positions in the 5,400-5,500-strike call options and built fresh short positions in the 5,400-5,500-strike put options. The 5,600-strike put options added 515,900 shares in OI through sell-side trades which hints at a strong up move above 5,600 in the near future.
