Nifty may get strong support below 5,380

After reaching the near-term target of 5,180, the market has seen a sharp recovery in the last two sessions on the back of short-covering by big traders and foreign institutional investors. The Nifty closed at 5,455, up 146 points, or 2.75 per cent, led by Larsen & Toubro, ICICI Bank, Infosys Technologies and Tata Motors. The traders covered short positions in the 5,200-5,400-strike call options, which indicates strong undercurrent.

The market picture chart hints at an upside resistance at 5,509-5,520 and lower-end support at 5,405. The spot Nifty is expected to get time-price opportunities-based resistance at 5,551 while volume-based upside is seen around 5,502. However, in case of profit-booking, strong support may come around 5,405.

The market will now move into the consolidation mode in the near term and may target 5,480 with overshoot limited to 5,550-5,570, says J Moses Harding, head, Global Markets Group, IndusInd Bank. The trade summary matrix (TSM) showed change of hands in the value area (5,380-5,444) with 60 per cent volume. There was profit-booking above the upper band of the value area and strong buying in the initial balance range (5,336-5,386).

So, the trading pattern set by floor traders and participation of positional traders in the value area indicate that the Nifty may get strong support below 5,380 and strong consolidation above 5,400 before a fresh upmove. The Nifty February futures, which settled on a par with the spot, saw unwinding of 3.38 million shares in open interest on an intraday basis. This means short-covering by bears and some long build-up by bulls.

There was considerable build-up in the 5,300-5,500-strike put options and unwinding in the 5,200-5,400-strike call options. The build-up of 3.75 million shares in open interest in the 5,400-strike put hints at a strong support base for the Nifty. The 5,500-strike put also added two million shares in open interest through sell trades. The TSM data show that open interest build-up in the 5,200-5,300-strike puts was mostly through buy-side trades, which indicates hedging of long positions.