Nifty to touch 5,367 on volume-based pullback

The Nifty moved between support and resistance on Friday, but closed in the green on the back of short-covering at the lower level and stability in the world markets. The smart rally in Nifty March futures from day’s low of 5,232 to high of 5,325 was significantly supported by buy-side volumes, accounting for 25 per cent in the 90 minutes trades. The volume-based pullback is expected to take the Nifty around 5,367 with time price-based resistance around 5,387. The strong Budget can pull the Nifty around 5,417, the volume picture chart suggests.

The foreign institutional investors (FIIs) were net buyers in index futures on Friday, mostly short-covering, the cumulative FII positions in the derivative segment as on February 24 suggests. The SGX Nifty settled unchanged on OTC Exchange, which indicates a steady opening on Monday.

Technically, the intraday pullback was based on oversold oscillator conditions, but overall setup has been a sell on rallies. The trading pattern in the Nifty put and call options hints at two-way swing with a potential downside below 5,100 and a significant upside around 5,700, depending on the Union Budget on Monday. Nifty March futures, which settled at a 10-point premium to spot, saw unwinding of 4.33 million shares in open interest (OI) in the intraday trade. It clearly means participants were unwilling to take positions ahead of the Budget session.

Significant build-up was observed in the 5,300-5,500 call options and 5,000-5,300 put options. The significant build-up was also seen in the out-of-the-money put options below 5,100. The trade summary matrix data indicated change of hands in 5,300-5,400-strike call options and buy-side trade in 5,500- and 5,700-strike call options. The buy-side trades was evident in the 5,100-strike put while 5,200 and 5,300 put options saw sell-side trades.

The bank Nifty saw some stability as its key components, State Bank of India (SBI) and ICICI Bank, closed in the green. March futures of ICICI Bank up 3.41 per cent on the back of short-covering of over 1.5 lakh shares. SBI rose 1.5 per cent on account of short covering in the March futures.