Support seen at 5,460, all eyes on US, Europe

After a weak opening and strong support at 5,438, the Nifty February futures settled above 5,500 at 5,524, providing some oxygen to the bulls. The bears succeeded initially to pull the futures down from the high of 5,527 to 5,460 during the 60-minute trade between 1.25 pm and 2.33 pm. But, the bulls gained control thereafter to take the index to the day’s high of 5,538 on the back of smart recovery in the European markets.

The intraday recovery from 5,460 is expected to continue tomorrow if US and European markets close in the green. The trade summary matrix (TSM) for the day suggests participants are cautious, with trading volume in the Nifty February futures showing a mix of profit-booking and short-covering.

The February futures settled at 5,523.55, a 17-point premium to the spot, without adding any open interest, despite an intraday build-up of 267 million shares.

Going ahead, the pullback is expected to continue at 5,595, around which the Nifty February futures may face strong resistance. The initial balance (IB) range saw strong buy-side volume around 5,438-5,486, hinting at a support zone for the bulls. The value area saw 62 per cent volume and 67 per cent time-price opportunities in the range of 5,464-5,510, mostly through change of hands. The trade summary matrix also indicates strong buy-side trade below 5,464, which suggests the index may get support at 5,460.

Reliance Industries and Larsen & Toubro recovered sharply from the day’s low to close above the value area on short-covering. The recovery is expected to continue, with Reliance Industries likely to move up to around Rs 951 and L&T around Rs 1,675, the volume picture chart suggests. The February futures of Reliance saw strong buying in the initial balance range (Rs 908-920) and significant 69 per cent volume above the mid-point (Rs 921.93).

Participants built long positions in the 5,500-strike call options on expectations that the Nifty may get support at 5,500 in the near future. There was change of hands in the 5,600-strike call options, as traders expected the current pullback might take the futures to around 5,600. Strong support is seen at 5,400, based on build-up of open interest in the 5,400-strike put options.