Nifty may break out below 6,000

The Nifty surrendered its crucial support of 6,100 to close at 6,080 on account of profit-booking in banking and auto stocks. Technology stocks, however, ended in the green on expectations of better earnings in the December quarter.

The Nifty January futures saw heavy sell-off above 6,130 and closed on a bearish note around the support level. The trading volume in the value area and the initial balance (IB) range hints at a weak undercurrent, with the spot Nifty expected to fall to around 6,030, while January futures may see strong support around 6,050.

The January futures closed around the lower band of the value area, with 26 per cent volume below the closing level. The trade summary matrix indicates change of hands in the value area (6,100-6,140) and in the IB range (6,133-6,151). Interestingly, the IB range was above the time price opportunities (TPO)-based support of 6,127. Hence, it may act as a strong resistance level in the near future. We had indicated the Nifty would find it difficult to trade above 6,180; the trading pattern suggests bulls will get an upper hand only if the index closes above this level.

The only good news for bull operators in the last three trading sessions has been that futures traded at a 25-point premium to the spot and the open interest remained unchanged at around 20 million shares, despite a 100-point correction, indicating short-covering by bears and holding of long positions by bulls. Nevertheless, the market picture chart for the day hints at a level of 6,184 based on TPO projections. The volume picture chart suggests support around 6,050. The spot Nifty is expected to face resistance above 6,150, while the index is likely to get support around 6,030.

The trading pattern in Nifty call and put options suggests the index may find it difficult to trade above 6,100 and is likely to get support at 6,000. However, profit-booking in the 5,900-6,000-strike call options and change of hands in the 5,900-strike put options suggest there is possibility of a breakout below 6,000 in the near future.

However, 75-95 per cent trading volume in almost all in-the-money and at-the-money call and put options was above the average premium value for the day, hinting at a significant weakness in the market.

Among stock futures, Bajaj Auto, which fell from the high of Rs 1,543 to Rs 1,378, may find support at Rs 1,327. HCL Technologies may rise afresh to around Rs 482, the TPO and volume picture chart suggest.