Nifty to settle around 4,900 level today

The market undercurrent has turned bearish on the penultimate day of the September series expiry, as traders rolled over short positions in the Nifty October futures, on concern of slowdown in corporate earnings. The October futures settled at a three-point discount to spot and the rollover cost for the Nifty fell to Rs 4 from Rs 13 yesterday, suggesting some traders had taken a bearish view and rolled over short positions.

Nevertheless, the rollover in the next month series, a day before expiry, has been lower at 14.02 million shares compared to the 15.78 million shares rolled in September series.

As expected, the Nifty completed a pullback rally by revisiting the 5,000-mark when the market opened for trading. The Nifty then slipped below the 5,000-mark instantly on account of selling by floor traders and weakness in other Asian markets. The weak opening for the European markets triggered a fresh fall around 4,918, but closed higher at 4,946 on account of short covering. The September futures settled at a discount to spot and saw unwinding of 4.95 million shares during the intraday trade. The top losers to the index, Larsen & Toubro, ICICI Bank and State Bank of India, slipped into the red after opening in the green.

The market will be trading for the expiry of the September series, and based on open interest build-up at 4,900-strike put options, it appeared the Nifty will settle around 4,900 tomorrow. The market picture chart suggested price based downside around 4,890 and volume based support around 4,867. The upside resistance is seen at 4,952 and any volume based rally is expected to end around 4,975. The trade summary matrix data for the September futures suggested selling in the initial balance (IB) range above 4,957. The 49 per cent time price opportunity count above the Point of Control (PoC-4,940) indicated higher level resistance.

Reliance Industries closed on a weak note after achieving our price based target of 810. The market profile for the day suggested a non-trend as it involves the day trader more than other time frame traders. The October futures of Reliance had narrow initial balance and accounted for 90 per cent volume. A non-trend day is often a precursor to a new vertical move. However, the October futures of Reliance closed at 798, around the lower IB range of 797-809. Hence, there is a possibility of sharp price correction tomorrow.