Support likely at 5,222

The market disregarded the open interest (OI) build-up at 5,400 and 5,300-strike put options as macroeconomic worries, caused by a rally in crude oil prices, triggered a huge sell-off. The Nifty slipped below 5,300 to close at 5,263 with auto, banking, capital goods and metals closing on a weak note. Investors are expecting further monetary tightening from the Reserve Bank of India to tame inflationary pressures. The Nifty March futures settled at a 17-point premium to spot and saw an OI build-up of 22.93 million shares, considerably higher compared to the last three months.

Bloomberg’s market picture chart indicates fresh weakness in key index heavyweights such as ICICI Bank, HDFC Bank, State Bank of India (SBI), Larsen & Toubro and Reliance Industries. The significant fall in Nifty after loss of support at 5,380-5,330 is likely to take the index to 5,180-5,140. The notably high volume in 5,300-5,500-strike call options of the March series suggest resistance levels for the index. The buy-side trades were seen in 5,300-5,400-strike put options and change of hands in 5,200-strike put options, which hints at a weak undercurrent.

The trade summary matrix data for Nifty March futures indicate buy-side trades below 5,322, but mostly in the form of short-covering. The profit-booking was seen above 5,360 and also in the initial balance range (5,402-5,440) and in the value area (5,302-5,396). Spot Nifty is expected to get support at 5,222 and resistance around 5,467.

The volume-based sell-off in Nifty futures in the last 90 minutes of trade is expected to take the index below 5,180.

The Bank Nifty is likely to witness selling pressure as its key components, SBI, ICICI Bank and HDFC Bank, closed on a weak note. The volume-based sell-off in the bank stocks is expected to take Bank Nifty to 9,976 with an upside resistance at 10,820. Among key bank stocks SBI may move down around 2,496. ICICI Bank may fall to 938-923, while HDFC Bank is likely to see volume-based sell-off around 2,027.

Among other index stocks, Reliance Industries may face strong resistance above 991 and is expected to get support at 964. Larsen & Toubro may fall around 1,491, the volume picture chart suggests.