Strong support expected at the 4,981 level

The Nifty opened below 5,100 on weak global cues, but closed above 5,100 after getting support at 5,030. The trading pattern in the Nifty October futures points at lower-level initiative buying from other timeframe traders.

The recovery was accompanied by significant buying in key index heavyweights such as State Bank Of India, ICICI Bank, Reliance Industries and Infosys Technologies. The participants covered short positions in the 5,000-5,100-strike October series call options during the post noon session, as they see limited scope for the Nifty to move below 5,050.

Short covering below the 5,050 and 5,000-5,100-strike call options in the October futures was mainly on account of the approaching expiry of the current series. The October series will expire on Tuesday, as the market remains closed on Wednesday on account of Muhurat trading and on Thursday for Diwali.

Also, the participants expect strong support for the Nifty around 5,100, based on open interest build-up at the same strike call options. The rollovers in the Nifty November futures were at a 18-point premium, hinting at a long build-up. The market undercurrent turned positive after volume-based recovery from an intraday low of 5,030 to a high of 5,111.

Floor traders were net buyers in the initial balance (IB) range of 5,070-5,098, which indicates the Nifty may get strong support if it slips below 5,070. The October futures closed near the upper band of IB range and 75 per cent TPO counts above the point of control (PoC-5,048), hinting at positive opening tomorrow, if global cues remain positive.

Nevertheless, price-based buying from top traders in the range of 5,063-5,098 would lead to a fresh upside around 5,127, the market picture chart sourced from Bloomberg suggested. The first support is expected to come around 5,075, also the lower band of the IB range. Strong support is expected at 4,981. The rise in open interest in the 5,200-strike call options through sell-side trades from top traders suggested fresh short build-up. An open interest of 3.4 million shares in the 5,000-strike call options and 6.18 million shares in the same strike put options suggested support level.