Strong resistance above 5,350 likely

The Nifty closed above the crucial support of 5,260 on Friday, but uncertainty remained as the Nifty, the Sensex and the world markets ended the week in a Doji pattern.

Foreign institutional investors (FIIs) built short positions in index and stock futures on Friday, indicating a fresh round of correction from Monday. The only positive for the bulls was that the July futures closed at a premium to the spot.

Nifty July futures, which closed at a 14-point premium, saw short-covering of around two million shares around 5,280-5,315, data from Bloomberg showed. However, FIIs built short positions at higher levels on Friday by increasing open interest in index futures through sell trades.

The market picture chart giving information on time-price opportunity (TPO) and volume on an intra-day basis indicates selling pressure from top traders. Bloomberg data show selling from top traders in Nifty July futures and short build-up in the 5,300-strike calls. The price projection using volume and TPO indicates continuation of support at 5,260 and strong resistance above 5,350. The support is seen at 5,200.

The highlight of Friday’s trading was a rally by shares of oil companies on deregulation of petrol prices and a partial hike in kerosene and LPG prices. BPCL, HPCL and Indian Oil gained 10-14 per cent while ONGC moved up around seven per cent. Futures and options participants covered short positions and built fresh long positions immediately after the announcements.

The market picture data for July series from Bloomberg indicate positive outlook and more than 10 per cent appreciation in shares of oil marketing companies in the near future. The July futures of ONGC is expected to move around Rs 1,358 from Rs 1,273, BPCL is expected to move around Rs 698 from Rs 697.50 and Indian Oil is likely to move around 430 from Rs 382.