Nifty expected to again move below 5,100

The Nifty closed above the crucial support of 5,100 on intra-day recovery in European markets. However, the recovery may not be sustained and the Nifty is expected to again move below 5,100 tomorrow. The European markets were in the red while the SGX Nifty fell below 5,100 over the counter on the Singapore Exchange. The support for the Nifty based on options contracts is at 5,000 while resistance is seen around 5,100.

The Nifty May futures continue to trade at a discount to the spot on account of short build-up by foreign institutional investors (FIIs). Derivatives data indicate that FIIs have built short positions around two million shares in Nifty futures and bought index puts since the beginning of the May series.

FIIs have also been net sellers in stocks futures since last week. Overall, traders have booked profit in the past few days as open interest in Nifty May futures has risen over two million shares, despite trading volume of 96 million shares.

The 5,000- and 5,100-strike calls saw huge open interest build-up and profit-booking in 5,200- and 5,300-strike calls, indicating fresh weakness. The participants unwound 5,200 and 5,300 put options as they expected the market might face strong resistance above 5,200. There was significant build-up of open interest in the 4,900 put (open interest up three million shares) and the 4,800 put (open interest up 1.12 million shares) through buy trades, indicating hedging of long positions.

Among stock futures, May futures of Patni Computer rose 8.5 per cent on long build-up of 3,00,000 shares. The futures closed above the upper band of value areas on strong volume. The volume and price movement around time-price opportunity areas indicate the stock has the potential to go near Rs 607. Infosys Technologies and Bharti Airtel are expected to rise on buying support. Tata Steel, Tata Motors and Reliance Industries closed in a Doji pattern, indicating indecisiveness at current levels.