Resistance above 5,700 likely

The Nifty July futures moved in a narrow range and closed near the support level at 5,550 on account of stalemate between the bulls and bears. The open interest (OI) in the Nifty futures, according to Bloomberg, headed for a three-year low. Concerned over the cost of trading, it climbed after the central bank raised the interest rates. Combined OI across all Nifty futures contracts before expiring tomorrow totaled 27.01 million shares, the lowest since July 2008.

Rollovers in August futures were at 13.30 million shares, compared to 16.23 million shares on June 29, a day before the end of the June series, according to the data. “Participation is low, as traders are limiting leveraged positions because of a rise in the cost of financing after the rate hike,” said Manoj Murlidharan, associate vice-president for derivatives at IIFL Premia, a subsidiary of India Infoline.

The aggressive stance of RBI delivered the last nail to make the bulls run for cover. “The market is expected to be in firm control of the bears, to push into immediate objective at 5,430 and not ruling out extension into 5200,” says Moses Harding- Head Global Markets Group, IndusInd Bank.

OI build-up in the put and call options and strong pull-back from the low of 5,518 on the penultimate day of expiry of the July series, hints at a narrow band movement tomorrow. The July futures expiry is expected to be at 5,547, as it settled at the middle of the day’s trading range with buy-side trades below 5,547. Market picture chart suggests resistance above 5,577.

Sell-side trades were observed in the Nifty August futures in the initial balance (IB) range of 5,570-5,599, indicating a short build-up at the higher levels. The market chart hints at upper level resistance at 5,627 for the August futures and lower-end support at 5,527.

The OI build-up in the 5,500-strike call and put options hints at strong support level for the Nifty in the August series. The immediate resistance is seen above 5,600 and strong resistance is likely to be above 5,700. The Nifty August futures settled at a 9-point premium to the spot and 3.84 million shares in OI mostly through sell-side trades, indicating a short build-up.