Nifty likely to touch 5,435

As indicated earlier, the July series expired around the 5,400 level due to participants taking little interest in rollover positions for the August series. However, we may see the market moving higher in the next month as the Nifty August futures is trading at a premium to spot for two weeks from now.

The futures hold an open interest (OI) of 26.16 million shares, down from the build-up of 29.58 million shares on expiry day of the June series. This suggests a creation of long-only positions by bulls.

However, bears seem to be overly cautious about the recent quarterly results and the range-bound trading in the domestic as well as global markets for two weeks now. The low OI build-up in the August series suggests that bears have been waiting for a clearer picture and for the market to break out of the trading zone.

The trading pattern in the Nifty futures and options hints at a narrow band movement for Friday. According to time-price opportunity (TPO) data, the Nifty may move up to around 5,435 with strong support at around 5,400.

The OI in the August series options suggests a cautious approach as participants were seen buying the 5,000-5,200-strike puts (OI up by 2.53 million shares) and selling the 5,300-5,400-strike puts (OI up 2.55 million shares). Participants also covered short positions in the 5,400-5,500-strike calls during the afternoon trade, when the August futures started strengthening above 5,400. Overall, the OI build-up in puts and calls indicates support for the Nifty at around 5,400 and resistance above 5,500.