Nifty seen slipping below 5,000

The Nifty slipped below its crucial support level of 5,100 on account of the persistent global pressure after Standard & Poor’s downgraded Greece’s sovereign debt to junk status. In the US, Dow Jones fell as the Securities and Exchange Commission filed civil fraud charges against Goldman Sachs.

FIIs were net sellers on the cash as well as the derivatives segment during the week ended May 7. On the cash segment, FIIs sold shares worth Rs 4,252 crore, while on the derivatives platform, they built short positions of over 4 million shares in the Nifty futures. FIIs also bought the Nifty puts to protect long trades.

The derivatives participants have increased short positions in 5,000-5,200 strike calls (open interest up by over 9 million shares), as they expect the Nifty may trade below the 5,000 level in the near future. The immediate resistance for the Nifty is at the 5,200 level and, thereafter at the 5,300 level. The support for the Nifty moved down to around 5,000 from around 5,200 at the start of the week. The support may move down further around the 4,900 level, if the global markets weakened further.

The SGX Nifty closed below the 5,000 level at 4,971 on the OTC counter of the Singapore exchange. SGX Nifty trades showed considerable weakness in the June series with a single trade at 4,930.

Among stocks futures, Reliance Industries saw short-covering on the favourable development in K-G basin gas pricing case.

RNRL and Reliance Power witnessed shorts build-up on account of the judgment. On the time-price opportunity (TPO) chart, Reliance witnessed multiple distribution trends, mostly in the form of short-covering and profit-booking. The TPO chart indicates a price target of Rs 1,080 for the scrip from the current close of Rs 1,034. RNRL showed fresh weakness, as the stock closed below the lower end of the value areas on shorts build-up. The price projection for RNRL using TPO is around Rs 32. Reliance Power witnessed strong sell-side trades, mostly shorts build-up. The TPO data suggest stock price around Rs 123.50 from the current close of Rs 140.50.