Nifty futures end on weak note, may see strong support

The Nifty tested the recent low of 4,901 on account of a weak opening of the European markets on concerns of significant downside risks to the US economy. We had indicated in our Tuesday edition that the domestic market was glued to global cues and if the Nifty failed to hold support at 5,007-4,950, it could revisit 4,901. The Nifty September futures fell below the recent low and closed at 4,908, marginally above the recent low. The market undercurrent has turned extremely weak, and hence, weak global markets could lead to a significant fall at around 4,759, suggested the market picture chart.

After falling below 5,050-5,000 with no follow-through momentum for a move above the support zone, the Nifty on Thursday moved out of the trading zone that was witnessed in the past one week. The disappointment from Fed and its lack of confidence into the future brings the focus back into 4,800. Buying in 4,800-strike put options in the last two trading sessions on Thursday indicated fresh weakness. However, significant open interest build-up at 4,700-strike put options suggested strong support level for the Nifty going ahead. The participant increased buy positions in 4,600-strike put to hedge short positions in the September futures.

There are no clear recovery signals as yet, but 18 per cent volume in initial balance range (5,040-5,062) through change of hands indicates strong resistance zone for the market. The trade summary matrix suggested 40 per cent volume and buy-side trade below 4,944, and hence there is a possibility of recovery around that level going ahead. Resistance is expected to come around 5,062. The Nifty September futures saw shorts build-up as it settled at a 10-point discount to spot and added 2.25 million shares in open interest.

The day’s top losers, Reliance Industries and ICICI Bank, are expected to see fresh correction tomorrow. Reliance is expected to revisit its recent low of 750, while ICICI Bank may fall around 843. The OI in the 4,800-strike put options at 8.84 million shares, against 1.83 million shares in the same strike call options, indicate that the 4,800 level may act as the support level for the Nifty.