Nifty to find stiff resistance above 5,300

The Nifty futures moved in a narrow band and closed higher at 5,239 on poor volumes in both cash and derivates segments. The trading volume in Nifty January futures declined to 11.86 million shares from around 42 million shares on the first day of the December series. It is difficult to predict the market movement in the near future due to extremely poor volumes. However, the intra-day trading pattern in Nifty futures and options suggested that traders booked profits while bears built short positions at higher levels.

Options traders wrote 5,200 and 5,300 calls on expectation that the Nifty would find it difficult to hold 5,200 levels in the near future.

Angel Broking has indicated that the third-quarter performance of the Sensex companies is likely to be healthy, largely due to the low-base effect and good performance from automobile, capital goods, cement and metals companies. FMCG, banking, information technology and telecom companies are expected to be the key underperformers, it says.

The trading pattern in Nifty options suggests the futures and options participants expect the Nifty to trade below 5,200 if the performance of the corporate sector in the third quarter is below expectation. The 5,200 put has seen significantly high volumes and added 1.07 million shares in open interest, mostly through buy-side trades, indicating hedging of long positions in Nifty futures. The 5,200 and 5,300 puts together added 0.72 million shares in open interest, mostly through change of hands and buy-side trades.

The 5,300-5,500 calls witnessed sell-side trades and together added 1.30 million shares in open interest, indicating the Nifty would find stiff resistance above 5,300. The 5,200 strike call, too, witnessed sell-side trades, mostly on account of profit-booking. The support for the Nifty is seen at 5,000 and resistance around 5,300.