Nifty May futures fall below 5,500

The Nifty May futures closed in the red — below 5,500 — after three consecutive days of consolidation above this level. The derivative participants preferred to book profits on account of a significantly weak opening for the European markets, and as the Nifty failed to get past the crucial resistance level of 5,580. The sharp volume-based downside from the day’s high of 5,578 to the low of 5,470 is expected to continue, if the poll results belie the exit polls expectations.

The trade summary matrix, or data on indicative buy-sell bids by traders, hints at a more buy-side volume in the declining market. It means a preferred profit-booking at the higher levels and short-covering at the lower end. The Nifty May futures closed at a marginal discount to spot and added 2.03 million shares in open interest (OI), indicating short build-up. The market is expected to remain weak, if the world market fails to recover. The favourable election results may help the market to bottom out, but an upside selling pressure remains above 5,580.

The volume in the IB range was not enough to support the price range that was established by the floor traders. The IB range is the first two TPO time periods of 30 minutes each. The value area (5,492-5,552) saw 66 per cent price opportunities and 55 per cent volume, indicating price-based selling. The 60 per cent TPO counts were seen above 5,520, but volume was significantly lower at 48 per cent. This clearly indicates price-based selling pressure above 5,520.

The market picture chart hints at a price-based resistance above 5,617 for the May futures and 5,601 for the spot Nifty. The added selling pressure is expected to take the Nifty below 5,400 and, thereafter, volume-based support may come around 5,392. Spot Nifty is expected to get support below 5,433. The May futures of bank Nifty are expected to face resistance above 11,150 and volume-based support is in place at 10,670. For State Bank of India, support is seen at 2,587 and resistance at 2,640.

Options traders are expecting the Nifty to lose its support at 5,500, as the same strike put options saw unwinding of short positions and call options added 1.68 million shares in OI through sell-side trades. The OI build-up at the 5,600 call options hints at strong resistance, while build-up at 5,400-strike put options suggests support level.