Nifty may fall to 2,840 on profit-booking

The Nifty opened on a positive note and remained range-bound in the morning session but moved up above 2,900 in the afternoon on short-covering. The index closed the day at 2,920 with a gain of 77 points.

Though Nifty February futures closed above 2,900 at 2,912, the average index value per trade remained at 2,868, indicating that traders were wary of taking positions above 2,900.

The Bloomberg data suggested that 25 per cent volumes in the Nifty February futures came in the last 45 minutes of trade, mostly through sell orders, at an average of 2,909, indicating profit-booking at higher levels. The February futures added an open interest (OI) of 2.06 million shares, while its discount to spot reduced from 13 points to eight points, indicating unwinding of short positions.

Though the Nifty had upward breakout in On Monday trade, technical analyst Ashish Shroff of Ambit Capital expected minor profit-booking to come in as the intraday momentum indicators were trading in the overbought zone. Profit-booking can pull the Nifty down to 2,820-2,840 levels.

Siddhartha Bhamre, equity and derivatives analyst at Angel Broking expected the F&O traders to square off long positions at 2,950-3,000 levels and lend support at 2,650 levels. He indicated that 2,800 strike calls and puts accounted for 24 per cent of the total OI in call and put options and hence the index might settle around 2,800 at the expiry of the February series.

The Nifty rallied 3 per cent on the back of strong gains in Bharti Airtel, Reliance Industries (RIL) and State Bank of India (SBI) on account of fresh long build-ups in the February futures. ICICI Bank, L&T and ONGC gained on short-covering. RIL led the gains on strong institutional interest as the energy giant was getting ready to sell gas from its huge fields off India’s east coast by March. The February futures of RIL added an OI of 562,725 shares and the Bloomberg data suggested that the rise in OI was on account of fresh buying.