Post-Budget support seen at 4,500

The Nifty could not sustain above 4,900 and closed in a Doji pattern, indicating indecisiveness at higher levels. As expected, it opened on a positive note. However, the gap-up opening above 4,900 could not be sustained as only 10 per cent volume, in the form of short covering, changed hands above 4,910, Bloomberg data showed.

With just three days left for the expiry of the February series, traders resorted to profit-booking as soon as the index slipped below 4,900. However, with no follow-up support even at these levels, the index closed at the day’s low, forming a Doji pattern. The European markets were steady to weak while the SGX Nifty was quoted at 4,870 over the counter, suggesting positive opening tomorrow.

Derivatives participants seem to be going slow on rollovers as March futures carry an open interest of 9.09 million shares, considerably lower compared to the rollover of 11.17 million shares in February series this time last month. Interestingly, Nifty March futures are trading at a marginal discount to the spot, and rollovers seem to be a blend of long and short positions.

There was profit-booking in 4,800 strike calls and puts as traders expected the index might not fall below 4,800 and might face strong resistance above 4,900. There was change of hands in the Nifty 4,900 strike put, mostly through sell-side trades, as participants expected that the February series was likely to expire around 4,900.

The trading volume in March puts and calls indicates the Budget for 2010-11 may not be favourable to capital markets as traders are not willing to sell 4,800-5,000 strike puts. The post-Budget support is seen at 4,500 as the 4,500 strike put of the March series holds the maximum open interest among all puts.