Nifty support likely around 5,865

The Nifty plunged further and slipped below the crucial support at 5,947 on aggressive selling across sectors. Among index heavyweights, Infosys Technologies and HDFC were down by three per cent, while Reliance Industries slided by two per cent. The market picture chart suggests very limited downside from the current level with support expected around 5,855. The SGX Nifty closed at 5,872 over-the-counter at the Singapore Stock Exchange, indicating a soft opening on Monday.

The Nifty is down by around five per cent this week from a high of 6,210, thereby moving into the lower end of the support. The weakness was driven by domestic cues triggered by scams, fall in banking stocks, inflationary pressures and rate rise expectations, said J Moses Harding, head-global markets group, IndusInd Bank. The dust in the domestic market should settle soon and the Reserve Bank of India is expected to stay moderate in its fight against inflationary pressures.

The Nifty January futures saw a significant jump in volume, of which 63 per cent of the day’s trades changed hands in the last two hours. The open interest in January futures rose by 3.1 million shares during the course of the day, but only 0.55 million shares were added to the previous day’s open interest. The futures continued to trade at a premium to the spot with carryover positions remaining unchanged around 20 million shares.

The Nifty would find it difficult to move above 5,990 initially and above 6,050 thereafter. The market picture chart for the day hints at a level of 6,137 with strong volume-based resistance around 6,153. The spot Nifty is expected to get support around 5,865, the time-price opportunities data suggest. However, the volume can take the Nifty around 5,855, the volume picture chart indicates.

The trading pattern in Nifty call and put options suggests support at 5,800 and resistance at 6,100. The volume-based sell-off saw a significant jump in open interest in the 5,900-6,200-strike call options through sell-side trades, indicating short build-up. The open interest in these call options has increased by over two million shares each, making the near-term recovery in the market more difficult.The increase in open interest in the 5,800-strike call options indicates the Nifty may test that level going ahead. However, an increase of 1.23 million shares in 5,800-strike put options suggests strong support may come around that level.