Nifty likely to consolidate above 5,200

The Nifty is likely to consolidate above 5,200 for a few more sessions before taking a major leap at 5,330. Resistance is expected at 5,270, while the key intraday support level is at 5,170. Technically, the Nifty has formed an inverted head & shoulder (H&S) on the daily chart. This generally has bullish results. The price objective for an inverse H&S would be in the 5,450-5,500 range, according to technical analysts at Edelweiss Research.

The Nifty June futures closed at a 12-point premium-to-spot and shed over 500,000 shares in open interest (OI), which indicates short-covering from bears. Trading data culled from Bloomberg suggests there was a change of hands from bears to bulls when the Nifty moved above the 5,225 level, even as retail traders covered short positions in the 5,180-5,225 range. A snapshot of the market, based on intraday volumes, indicates the Nifty has the potential to go up to 5,280.

Options participants covered short positions at 5,100- and 5,200-strike calls on expectations of strong support for the Nifty above 5,200 in the near term. The 5,300- and 5,400-strike calls added significant OI, indicating a hedging of short positions by bears. The 5,100-strike put added a million shares in OI, which confirms the strong support base for the Nifty. However, the support is expected to move up to the 5,200 level as the 5,200-strike put options added 1.76 million shares.

Among stocks futures, ITC is likely to cross the Rs 300 mark, according to intraday market data. Over 70 per cent of ITC’s June futures among top traders were above Rs 290. This suggests high net worth individuals have taken long positions in this stock. Larsen & Toubro is also expected to move up to around Rs 1,760 as its June futures saw strong buy-side volumes from top traders at Rs 1,718. Reliance Communications achieved the target of Rs 187 and intraday trades suggest profit-booking took place at higher levels.

Reliance Natural Resources gained around nine per cent on short-covering. Price projection data, using volumes, suggest an upside value of Rs 75. State Bank of India is expected to cross Rs 2,400 in the near future, based on price-projections using intraday trading volumes.