The strong close above 6,220 on Wednesday lasted only for a day. The Nifty on Thursday surrendered yesterday’s gain to close significantly below the resistance level at 6,177 on profit-booking at higher levels.
The Nifty October futures faced time-price opportunities (TPOs)-based resistance at 6,318 to close at 6,181. The futures saw the premium to the spot fall to just five points from 42 points, mostly due to long unwinding, as open interest in the October series fell by 2.24 million shares.
The domestic investors, who were in the exit mode, joined the party and participated in the rally. A sharp upmove was mainly triggered by global cues with confirmation of the Federal Reserve’s commitment to soft interest rates and no cause for concern on inflation, said Moses Harding, head (global markets group), IndusInd Bank. Foreign institutional investors, who bought Rs 2,100 crore worth of shares from the cash market, built fresh short positions in index and stocks futures on Wednesday.
The market is expected to see a marginal correction up to 6,135 with volume-based support around 6,105. The Nifty futures closed bellow the lower end of the value area (6,215-6,290) with 31 per cent volume, with market participants spending only 20 per cent time in the area. This signals lack of support for the Nifty above 6,215 in the near future. The initial balance price range (6,255-6,318) created in the first hour saw 56 per cent volume and 70 per cent TPOs, hinting at a strong supply zone for the index.
No wonder the market participants expected Nifty futures to face strong resistance above 6,200 in the near future as they built short positions of 898,800 shares in the 6,200-strike calls and 542,950 shares in the 6,300-strike calls. The unwinding of short positions was seen in the 6,200-strike puts and participants bought the 6,300-strike puts to hedge long positions in the Nifty futures. Nevertheless, the Nifty has strong support at 6,000 based on open interest build-up in put options.
