Nifty's expiry level to be around 5,400

As expected, the Nifty moved in a narrow band of 40 points and closed below 5,400 on profit-booking at higher levels. The 50-issue index has been firmly stuck in the 5,400-5,446 range for the last few trading sessions.

According to trading data pertaining to Nifty futures, renewal of contracts into the August series from July has been low as participants are cautious on account of the subdued first quarter results. The daily post-opening trading range has also reduced quite a lot, which shows buyers and sellers are increasingly becoming indecisive and going slow in their operations.

A price projection on the basis of time-priced opportunity (TPO) range for the last two and half hours suggests a Nifty level of 5,360 for Thursday’s trade. If we use the Tom DeMark (TD) range methodology, then a high of 5,422 and a low of 5,362 can be projected for the same session.

The volume of open interest (OI) in the Nifty puts and calls of the July series hints at resistance above 5,460, with expiry expected around the 5,400 level. Participants have already covered their short positions in the 5,400-strike put and built up fresh short in the 5,400-strike call on such an expectation.

The OI in the Nifty July series has been lower at 13.83 million shares a day before expiry, compared to 20.37 million shares during the same time last month. The Nifty August futures hold an OI of 21.06 million shares, lower than the 22.09 million shares held in the July series at the same time last month.

This means the OI build-up into the August series on the day of expiry is expected to be lower than the 29.58 million shares in the July series.

The lower build-up in the next month series suggests weakness in the near term. The build-up of OI in puts and calls of the August series indicates the Nifty may face strong resistance above 5,500, while it might continue to trade above 5,400. Strong support exists at the 5,300 level. The Nifty may move up above the 5,500-5,600 levels in August if it could close above the intraday high of 5,475 achieved last week.