Nifty building support at 2,900

The Nifty once again tested the 2,870-support level and then closed above 2,900 at 2926 as participants covered their short positions at lower levels. Though the index has a strong support at 2,870, it once again failed to close at or above 2,962, which is the crucial level for its upward journey to 3,150.

The F&O segment witnessed strong buying in 2,900, 3,000 and 3,100 call options and fresh unwinding in 2,800 call options. This indicates that a section of F&O players expects the Nifty to move above 2,962 and even revisit its recent high of 3,150 in the near future.

The open interest (OI) at 2,800 put and call options remains high at 13.25 million shares, indicating that the index has a strong support at 2,800 and that it may not close below 2,800 in the near future. The 2,900 put and call options also hold an OI of 9.35 million shares, indicating that the Nifty is building a strong support base at this level.

FIIs have built up OI in Nifty options contracts, which have increased from 839,719 to 995,251, mostly by selling puts and buying calls in the past few days. This indicates that they expect the market to remain firm.

Nifty February futures closed at 2,924.70, a 10-point discount to the spot. The February futures added an OI of 820,000 shares, while the Bloomberg data suggested that the increase in OI was largely on account of strong buying in the last 30 minutes of On Wednesday trade. The March futures closed at a discount of four points to the February futures but added an OI of 263,800 shares, indicating build-up of short positions.

Banking shares were mixed with State Bank of India (SBI) witnessing a sharp recovery from the day’s low of Rs 1,131 to Rs 1,162 on fresh buying at lower levels. ICICI Bank too recovered from Rs 415 to Rs 436 on short-covering and fresh long-buying. HDFC Bank closed at Rs 938 from the intraday low of Rs 916 as traders built up long positions in its February futures.