The Nifty September futures settled below 4,750 from the intra-day high of 4,888 and low of 4,718 on account of distress selling below 4,800. The close below 4,750 is major concern for the bulls. Going ahead, there is a possibility that Nifty would dip below 4,700 and get support at 4,650. According to Moses Harding- Head Global Markets Group, IndusInd Bank, it is possible that shorts squeeze and position unwinding ahead of Jackson Hole weekend would guide it to close above 4,900, which would give good comfort to the bulls. Strong global cues and a 35 point rise in SGX Nifty in late trade on Friday suggests strong opening on Monday.
The market undercurrent continued to be weak and the trend changed to sellers/bearish. The Nifty is expected to test 4,600 if it fails to hold major support at 4,700. The September futures closed at par with spot and despite strong open interest (OI) build-up during the course of the day, there was unwinding of over two million shares in the settlement period. This, indicates long unwinding and build-up of fresh short positions by new players. It was also a net selling day as the Nifty closed below the point of control (PoC-4,850) with 74 per cent TPO counts below the level.
The market profile for the day suggested responsive selling, with sellers putting there shares on the block as soon as the index opened above the previous value area. This dragged the prices lower, right from the opening, and the market remained in the sell-mode. The market picture chart hinted at volume-based selling for the September futures at around 4,647. However, the pullback, if any, on account of short covering would take the index to around 4,977, the MKTP chart suggested. Selling pressure in the initial balance (IB) range (4,840-4,884) indicated strong resistance around those levels.
Options traders covered short in 4,700-4,800 strike put options and initiated a fresh short in the 4,700-4,800 strike call, as participants expected the current bear phase to continue for a while. They also expect the Nifty to face strong resistance above 4,900. The OI build-up at the 4,600-4,700-strike put options through sell-side trades indicated strong support for the Nifty below 4,600.
