Nifty unlikely to slip below 5,900 level

The markets danced to the tune of F&O players with the Nifty September futures facing strong resistance at 6,050 and getting support at 5,960. We had indicated in this column on Wednesday about both the resistance and support levels and extended profit-booking in the Nifty. Going ahead, the market is expected to be range-bound with resistance likely above 6,050, along with price-based support at 5,942. The open interest (OI) build-up in the 5,900-strike put options suggests the Nifty is unlikely to slip below 5,900.

There seems to be some hesitation among F&O players for going long at higher levels, even as they do not seem to want the index to slip below 5,950. The September futures saw only 16 per cent volume being struck below the previous day’s low of 5,973, mostly through buy-side trades, and around 16 per cent above 6,020, mostly through sell-side trades. This indicates the support and resistance levels for the Nifty. The 70 per cent volume and time-price opportunities (TPOs) traded in the value area (5,965-6,020) shows the future trading band for both volume as well as price traders.

The Nifty September futures added 2.78 million shares in OI intraday, but this came down by 2.20 million shares by close of trade. This was mostly on account of profit-booking at higher levels, according to trading data sourced from Bloomberg. The futures, however, closed at a premium of 10 points to spot, which shows there was short-covering at lower levels. Interestingly, the Nifty October futures closed at a 13-point premium to current month's futures and added 781,000 shares in OI, hinting at a strong bull-run next month.

The Nifty seems to be precariously poised at 6,000 levels as participants added significant OI in the 6,000-strike call and put options.

The 6,000 put added 1.09 million shares in OI, taking the total OI to 6.49 million shares, while the 6,000 call options added 1.20 million shares in OI to 5.72 million shares. This indicates participants expect major either-side movement in the Nifty from current levels. The 6,100-strike put options witnessed short-covering from traders on expectation of resistance in the Nifty above 6,050.

Among stocks futures, L&T and RIL are expected to be volatile as there was volume-based selling at higher levels. The market picture chart indicates that volume-based sell-offs can take L&T to around Rs 1,932. RIL saw 75 per cent of volume below the previous day’s low of Rs 1,032, mostly through sell-side transactions. The volume-based selling may take the stock to around Rs 997, according to TPO data.