Nifty may break out from sub-5,200 level

The Nifty July futures remained listless after a gap-down opening and closed near the opening level, indicating indecisiveness among participants in the derivatives segment. Trading activity was within a small price range with most participants willing to trade at 5,235-5,260. The big players were sellers above 5,255, while 70 per cent of the volume distribution on a time-price opportunity (TPO) chart was seen at 5,240-5,260.

The price projection using TPO at the Point of Control (PoC) area is around 5,280, while price projection on the basis of volume data is at 5,222.50. This is a clear indication that the price buyer sees strong resistance for the Nifty above 5,280, while volume traders expect the Nifty to get support at 5,200. This means the Nifty is expected to trade between 5,220 and 5,280, unless the upside resistance (5,330) and downside support (5,180) are broken.

The Nifty July futures has been trading at a premium to spot in the last few trading sessions, indicating that bulls have not yet liquidated their long positions. However, considering the current open interest (OI) build-up of 32.92 million shares, it seems bears have held onto their short positions, too. Also, the intraday trading in the last few sessions indicates short-covering at lower levels. This indicates continuation of lower-level support as well as upside resistance, at least till the unwinding of positions from the bulls and bears.

Participants remain short at the 5,400-5,500-strike calls, even as fresh short build-up has been created at the 5,300-strike call. The 5,200-strike put has been witnessing a change of hands, but substantially lower volumes in the last few trading sessions. The 5,100-strike put also witnessed short-covering during the morning session and profit-booking in the afternoon session. The trading pattern in calls and puts – as well as the OI build-up – in the last few sessions suggests the index is heading for a breakout below 5,200.

Among stocks futures, Hindustan Unilever (HUL) and IDFC witnessed short-covering from top traders. However, according to TPO data, there is a very limited upside for HUL at around Rs 275. The July futures of IDFC are expected to move around Rs 188 from the current close of Rs 182. The TPO support for IDFC is seen at Rs 176.50.

The TPO data also indicates a listless movement for Bharti Airtel, while the upside of Rs 1,116 is intact for Reliance Industries.