Nifty July futures end on a weak note

The market undercurrent turned extremely weak on the last day of the July series on the account rollover of short positions in the Nifty August futures and saw a subdued closing of key stocks futures. The market seems to be dominated by short-term traders engaged in technical trades and hence the rollovers in the August futures were extremely poor at 18.91 million shares.

The trading pattern in key stocks futures, such as Reliance Industries, HDFC Bank, Infosys Technologies, ICICI Bank, Larsen & Toubro, State Bank and TCS, indicate significant weakness in the market. The Nifty is expected to face strong resistance above 5,520 and on the downside if it breaks below 5,430, the support may come around 5,300.

The Nifty August futures opened on a weak note and moved in a narrow range to close near the support level at 5,500. Floor traders expected sideway trading and preferred changed hands in the August futures in the first two TPO time periods.

The initial balance (IB) range (5,502-5,522) saw sell-side trades that indicated that the other time-frame traders, mostly institutions, build-up short positions in that range. The short covering was seen in the last thirty minutes when the Nifty slipped below 5,480. The call options traders were expecting the market to remain weak in the current series and hence built short positions in the 5,400-5,600-strike call options. The participants were seen buying 5,300-5,500 strike put options when the Nifty slipped below 5,500.

The Nifty August futures settled at 5,499, an 11-point premium to spot, and added 5.60 million shares in open interest through sell-side trades. The market chart hinted at upper level resistance at 5,529 for the August futures and lower-end support at 5,469. The volume-based decline in the last four trading sessions was expected to take the Nifty to around 5,275 in the near future, the market picture chart sourced from Bloomberg suggested. The call and put options traders expected support for the Nifty at around 5,400 and resistance above the 5,500 mark.

Among key stocks futures, Reliance Industries is likely to fall around 786, HDFC Bank 480, Infosys Technologies 2,661, SBI 2,175, ICICI Bank 971 and Larsen & Toubro 1,602. The price projection is based on the MKTP chart and by tracking the price decline in these stocks in the last four trading sessions.