Nifty to see strong rally above 5,330

The Nifty crossed the 5,330-mark to close at 5,354, buoyed by strong Asian markets that rallied after China decided to allow greater flexibility in the yuan exchange rate. We had indicated in this column last week that the Nifty was poised to cross the 5,330 level before the expiry of the June series.

According to data pertaining to intraday trading in Nifty June and July futures, the index may face a strong resistance above 5,400. The price projection for the Nifty, using time-price opportunity (TPO) data sourced from Bloomberg, is between 5,410 and 5,430.

The volume of trade in the Nifty June and July futures indicates there could be a strong rally above 5,330, with further support from large volumes at higher levels. The Nifty June futures saw 52 per cent of trade above 5,360, while 72 per cent of volume changed hands above 5,360 in the Nifty July futures. The Nifty June futures shed 3.17 million shares in open interest (OI), while the July futures added 3 million shares in OI and closed at a premium of 11 points, indicating a rollover of long positions.

The participants covered short positions in the 5,300-strike call and built up a short position in the same strike put. This indicates strong support is being built up at 5,300. The 5,400-strike call now holds the maximum OI among call options, which indicates expiry is likely to be at 5,300-5,350. The strong rally above the 5,400 level is expected after the expiry of the June series as top traders bought 5,300-5,400 strike calls and sold 5,400-strike put of July series.

Among stocks futures, ICICI Bank, ITC, Larsen & Toubro and State Bank of India achieved the price projections indicated in this column last week. ICICI Bank closed at around Rs 900 with 50 per cent of the volume being traded above the closing level. The TPO chart suggests a fresh rally in this stock between Rs 925 to Rs 930. Larsen & Toubro saw 53 per cent of trades above the closing level (Rs 1,836), mostly through short-covering by top traders. The stock is expected to move up to around Rs 1,865 in the July series, according to TPO data.

ITC closed around the TPO target of Rs 300 on short-covering. It is now expected to move up further — say, Rs 308 — in the next month series.