Nifty likely to be more volatile above 2,900

The Nifty maintained support at 2,870 but closed below 2,900 at 2,894 as traders were indecisive on taking fresh positions before the interim budget. For the last couple of trading sessions, Nifty has been consolidating near 2,900. While doing so, technical indicators on the intraday chart have drifted to neutral-to-oversold range from the earlier overbought zone, says a technical analyst of Ambit Capital.

The trading volume in the F&O segment remained more or less unchanged in the last three trading days, indicating that intraday traders are not taking any positions due to range-bound markets. However, they are not letting go of any opportunity to buy at lower levels as is evident from the Nifty’s rebound in the last three consecutive days from its support level of 2,870. On the downside, the Nifty has support at 2,840 with stop loss at 2,700.

Nifty February futures continue to trade at a discount to the spot, indicating that participants are still holding on to their short positions. The intraday trading data show that almost 34 per cent of the volume changed hands at an average of 2,885 and another 25 per cent at an average price of 2,895. At the end of today’s trading session, the open interest (OI) in the February futures declined by 865,950 shares, indicating covering of short positions at lower levels. The 2,900 call option was active and added an OI of 189,450 shares to 5.14 million shares. The 2,900 strike put has an OI of 3.47 million shares, which indicates that the index will be more volatile above 2,900. The 2,800 strike put option has an OI of 1.37 million shares, largely on account of profit-booking by put buyers.