Market may not fall sharply in expiry week

F&O OUTLOOK

Technically, the upside bias weakened considerably on Friday as the Nifty could not revisit the morning session’s high of 5,302 in the afternoon. However, the market may not correct sharply in the expiry week, as strong support is seen at 5,230-5,240, based on time-price opportunity (TPO) and volume charts sourced from Bloomberg. Nifty June and July futures have not closed below 5,260, maintaining the volume-based support created by top traders on Thursday. The TPO data for Nifty July futures indicate a revisit of 5,300 and strong resistance above 5,310.

Trading in Nifty June and July futures on Friday suggested traders booked profit as rollovers in Nifty July futures were lower at 1.65 million shares compared to unwinding of open interest in 1.87 million shares in the June futures. Both futures closed at a marginal discount to the spot, suggesting short build-up at higher levels. Trading volume data indicate resistance at higher levels as only 16 per cent volume in Nifty futures changed hands above 5,285. The July series showed strong support at 5,260 as only three per cent trades changed hands below 5,260.

Trading in call options shows short-covering in the 5200-strike call and fresh short build-up in the 5,300-strike call. This means there is strong possibility of the Nifty staying below 5,300 and getting strong support at 5,200. Put writers booked profit in the 5,100-strike put and built short positions of 0.70 million shares in the 5,200-strike put. The 5,200-strike put holds the maximum open interest among put options, indicating strong support. The resistance is expected to be above 5,300 based on open interest positions in the 5,300-strike call.

The market is expected to show no appreciable movement during the derivatives expiry week and trading activity is likely to be within a small price range. This is because the Nifty closed at 5,260 on Friday and is expected to get volume-based support around 5,230. The only concern has been short build-up by foreign institutional investors (FIIs) in index futures on Friday. The world markets have been showing no definite trend, with Dow Jones, NASDAQ and S&P 500 closing in a Doji pattern on three consecutive days. It seems traders worldwide are waiting for an either-side breakout to come out of the non-trend zone.