First hurdle at 5,580

The Nifty staged a smart rally as oil prices declined and DMK delayed its decision to withdraw from the Cabinet. Nifty March futures closed at a premium to spot, as bears covered short positions of around one million shares in the intra-day trade. The trade summary matrix (TSM), which indicates buy-sell positions of traders, saw change of hands in initial balance range (the first two time price opportunities, or TPO) and value area (5,502-5,534). The trading activity remained tightly range-bound and fell within a small price range.

So, the day’s trading summary in the derivative segment hints at a consolidation around the current levels. The options traders covered short positions in the 5,300-5,600-strike call options and built-up fresh long positions in the 5,700-strike call options. The significant build-up was observed in the 5,400-strike put options, and also in the 5,500-put options. The traders also sold the 5,600-call options. There has been significant positive undercurrent for the market to move out of the trading zone and go past the crucial resistance level of 5,580-5,620.

Nifty March futures closed at a 16-point premium to spot signals that the bulls are back in action. However, range-bound trading in Nifty futures indicates that the index is likely to face its first hurdle at 5,580 and around 5,620 thereafter. The spot Nifty is expected to face resistance around 5,555 and most crucial support at around 5,480. The initial balance range (5,466-5,538) established by floor traders saw 92 per cent volume and 95 per cent TPO, which hints at price-based short-covering at those index levels.

The value area (5,502-5,534) saw buy-side trades and 72 per cent volume as well as TPOs, and hence, the Nifty is expected to get strong support at those levels. The traders covered short positions below 5,502 and booked profit above 5,535, the TSM data indicates.

The Bank Nifty is expected to move in a narrow band with a volume-based resistance seen at 11,085 and TPO-based support at 10,845. Where index heavyweight State Bank of India may face resistance at 2,667, ICICI Bank is likely to get support at 1,000 and face resistance at 1,033.