F&O OUTLOOK: Nifty may close around 5,200 in this expiry

The Nifty closed in a Doji pattern after a breakout above 5,182 on profit-booking above 5,200. The trading volumes on the futures and options (F&O) segment declined by over Rs 10,000 crore with the number of contracts in index futures lower by almost 12 per cent. This means the participants are wary of taking positions at the current level as only two trading days are left for the expiry of the current series.

The rollovers in Nifty January futures were lower by almost 3 million shares, which indicated that speculators were willing to take exposure at the current level as they wanted the market to come out of range-bound trading period. In the end, the Nifty December futures unwound 4.52 million shares while January futures added 4.52 million shares, mostly through sell-side trades, indicating a short build-up.

The spot Nifty closed at 5,187 while December and January futures settled at 7-14 points premium, indicating a bullish outlook. According to technical analyst Gautam Shah of JM Financial, a close above 5,182 was a formality and so the Nifty was expected to move around 5,270-5,300 — expected to a strong supply zone. Overall, the set-up remains positive, calling for continuing strength in the holiday-shortened week.

Options traders expected the Nifty to cross 5,300 in January as they built fresh positions of 559,400 shares at 5,200-5,400 calls of the January series. However, 5,100 and 5,200 calls of the December series witnessed profit-booking at higher levels, which indicates that the participants expect the Nifty to settle around 5,200 in the current month expiry.

The January series witnessed strong build-up of open interest at 5,000-5,200 puts as traders expected the current bull run to continue and the Nifty to remain strong above 5,200. The strong support for the Nifty is expected to be around 5,100 but fresh build-up of open interest in the 5,200 put of the December series just two days before the expiry indicates that the Nifty may close around 5,200 in this expiry.