Nifty likely to face resistance at 2,800

The benchmark indices, Nifty and Satyam, spurted in late trade today on increased buying in auto and FMCG stocks, and short-covering in Reliance and key banking stocks.

The firm opening of the European markets and higher US index futures aided the intraday rebound. The market was volatile as traders squared positions in the February series and created fresh positions in the March series.

There are expectations that the Reserve Bank of India (RBI) will cut interest rates further to support a faltering growth. Trading in the US index futures indicated that the Dow could rise with the opening bell.

Trading data suggest that futures and options (F&O) traders are wary of taking positions either in index futures or in index options.

The rollover in the Nifty March futures were lower at 27.65 million shares compared to 29.56 million shares in the February series last month. The March Nifty remains at a discount to the spot, which indicates that bears have rolled over short positions.

Options traders expect that the Nifty may hold its support of 2,700 and face a strong resistance at 2,800.

However, going by the open interest (OI) of 5.90 million shares (2.78 million shares last month) in 2,700 put and 5.27 million shares (3.04 million last month) in 2,500 put of the March series, it is expected that some traders have taken a bearish view and bought out-of-the-money puts.

The 2,800 call (OI of 3.71 million shares) and 2,900 call (OI of 3.38 million shares) hold considerably high OI, which indicates that the Nifty has resistance above 2,900.

Key index stocks such as Reliance Industries (RIL), ICICI Bank and State Bank of India (SBI) witnessed short rollovers.

RIL’s March futures witnessed a rollover of 1.49 million shares compared to 1.25 million shares expired.

The rollover in ICICI Bank March futures was higher by over 2 million shares and in SBI, it was higher by around 1 million shares compared to the expired position in the February futures.

This indicates that these stocks may face selling pressure in the near future.