The Nifty opened as expected and remained range-bound thereafter on profit-booking. The market is expected to be range-bound tomorrow as well and may witness profit-booking at higher levels as only six trading sessions are left for the expiry of the current month’s series.
Also, there was weakness in Nifty February and March futures as they closed at a discount to the spot despite intra-day short-covering of over three million shares. This means the bulls are not building fresh long positions while the bears are covering short positions. In the absence of fresh long build-up, the market is likely to be range-bound till the expiry of the current month’s series.
Bloomberg data suggest short-covering at lower levels and profit-booking at higher levels. The Nifty futures, which closed above 4,900 after eight trading sessions, has seen a decline in open interest by around four million shares from the peak of 31.27 million shares on February 8, mostly through short-covering by foreign institutional investors (FIIs).
FIIs, which built short positions in the first week of the current month, covered short positions subsequently as the Nifty moved up from the low of 4,667 to above 4,900 on strong global cues.
The near-month February 2010 derivatives contracts expire on Thursday, a day before the presentation of the Union Budget on Friday. So, futures and options participants may wait for the Budget before taking positions. This means the market has limited scope to move up without strong global cues. Nifty put and call options data suggest strong resistance between 4,900 and 5,000. The support is seen at 4,800 and can move around 4,900 (based on open interest build-up at 4,900 in the last couple of trading sessions).
