Index seeing consolidation around 4,830

The Nifty faced strong resistance above 4,940 and closed at 4,830 on lack of buying at higher levels. Bloomberg data suggested the index was consolidating around 4,830 as participants bought Nifty February futures below 4,850 and booked profit above 4,914. However, Nifty February futures closed at a discount of nine points to the spot and added 2.31 million shares in open interest, indicating build-up of short positions.

The Nifty maintained its support of 4,800 but failed to close above 4,940. A crossover of this level was important to stem the recent downturn, said an analyst at Motilal Oswal Research. However, a close of around 4,830 for the fourth successive day indicates continuation of indecisiveness at current levels. On the options front, the Nifty February 5,000 call holds the maximum open interest of 4.96 million shares, indicating resistance levels. The Nifty February 4,800 put holds the maximum open interest of 6.27 million shares, indicating resistance.

Intra-day trading in Nifty puts and calls suggests that the market is likely to be volatile in the coming days as India IVX rose 4.22 per cent to 26.69. Bloomberg data suggest the Nifty may slip below 4,800 in the near future as open interest in this call has risen 41 per cent through sell-side trades, indicating short build-up. The open interest in the 4,900 call rose significantly (1.18 million shares) through change of hands, indicating uncertainty above 4,900. The open interest in the 5,000 call increased 20 per cent through buy-side trades, indicating that a few participants expect a breakout above 4,940 soon.

Traders covered short positions at 4,600-4,700 puts on expectation of a breakout of 4,800 levels in near future. The 4,800 put added 1.05 million shares in open interest, mostly through buy-side trades, indicating hedging of long positions.