Nifty key support at 5,000

The market opened weak and sustained selling pressure saw the benchmark indices, the Nifty and Sensex, lose their crucial support levels of 5,150 and 17,300, respectively. The spot Nifty closed at 5,094 while January futures closed at almost 10 points discount on profit-taking and short build-up.

The January futures added 1.42 million shares in open interest despite that fact that only three trading days are left for the expiry of the current month series, indicating fresh short build-up. The February futures added 1.47 million shares in open interest through a blend of buy and sell contracts.

Avinash Gupta, vice-president, research, Bonanza Portfolio, said the guidance by Larsen & Toubro (L&T) disappointed the market. The third-quarter performance of the engineering giant and power equipment major BHEL were below market expectations, which added to the downward pressure. In the futures and options (F&O) segment, the January futures of L&T were down 6.4 per cent amid build-up of fresh short positions on expectation of a fresh correction. The January futures of BHEL slipped 4.3 per cent on profit-booking and short rollovers in February futures.

Put and call options data suggest that the 5300 call continues to hold the maximum open interest (8.18 million shares) while the 5,200 call has added significantly high open interest in the last couple of days. The means the Nifty has resistance at 5,300 and 5,200, which was a strong support, is turning into a strong resistance level. The 5,000 put hold the highest open interest (6.48 million shares), indicating strong support base for the index. The India Volatility Index (IVX) rose 5.43 per cent to 23.20 on account of increase in premium for put options, indicating fresh correction.

Technically, the market has been trading in choppy waters due to formation of a Doji pattern and narrow trading range in the January series. The Nifty slipped below 5,180 and closed at 5,091, indicating a downward breakout.