Nifty expected to stay within 5,446-5,550

The Nifty futures moved within the set of immediate term range of 5,420-5,510 on Wednesday but closed on a weak note on account of profit-booking at higher levels. The undercurrent is extremely weak in the domestic market, despite a few global indices climbing to 29-months highs.

It seems derivatives traders are unwilling to carry over positions to the next day and prefer squaring off intra-day deals to protect losses in case of sharp reversal from the current level.

The near-term outlook continues to remain weak, despite the current valuation looking good for strategic investors, says J Moses Harding, head, Global Markets Group, IndusInd Bank. The focus is now at 5,348 – the low seen on August 30, 2010, from where foreign institutional investor-driven rally pushed the market to a high of 6,338. We are now close to 100 per cent retracement; down by over 14.5 per cent in less than three months, which is considered excessive, given the current market fundamentals.

The Nifty futures failed to breach the higher-level resistance again and closed near the day’s low, as small traders unwound intraday positions. The index maintained the crucial support of 5,400 and closed at 5,432. If the market breaks below this level, the next support for Nifty February futures is around 5,360. For spot Nifty, volume-based support is seen at 5,368, while time-price opportunities-based resistance may come around 5,502.

The trade summary matrix show buy trades from liquidity suppliers in the initial balance (IB) range (5,456-5,492). The volume in IB range also increased from 13.4 per cent on Tuesday to 57 per cent on Wednesday, indicating possible consolidation around these levels before an upside breakout. The value area (5,446-5,502) saw a change of hands, but strong buying in the range of 5,446-5,470. The market picture chart show profit-booking above 5,500 and short-covering below 5,446. Hence, the Nifty is expected to move in this range going ahead.

Trading in call and put options hints at strong support at 5,400. The 5,500-strike call added 656,350 shares in open interest (OI) and now carries OI of 6.2 million shares, indicating resistance for the Nifty above this level.