Trading indicates fresh declines in near future

Both Nifty and Sensex on Thursday closed in the red on profit-booking and weak global markets. Automobiles, information technology, realty, healthcare and FMCG (fast moving consumer goods) stocks led the fall. The Nifty, as expected, moved in a narrow range, faced resistance above 5,300, and closed at 5,263, down 19 points.

The trading pattern in index futures and options clearly indicates fresh declines in Nifty in the near future. Nifty January futures, which shed 107,850 shares in open interest, witnessed profit-booking at higher levels. The 5,200 call, which added 19,100 shares in open interest, witnessed sell-side trades, indicating profit-booking.

Put options traders booked profit at 5,200-5,400 strike puts as they expected the Nifty to move in a narrow range of 50-100 points. The 5,100 put saw change of hands from sellers to buyers as few futures and option participants expect the Nifty to fall below 5,200 if it loses support at 5,205.

The support for the Nifty based on build-up of open interest is at 5,000-5,200 as these puts account for 46 per cent of the total open interest in put options. Based on build-up of open interest in call options, resistance is seen at 5,200-5,400 as these calls account for 58 per cent of the total open interest in call options.

The highest build-up has shifted from the 5,300 call option to the 5,400 call option, where we may see positional resistance. The zone of 5,150-5,180 on the Nifty is now an important support in case the expected pullback takes place, says a technical analyst at JM Financial.

According to analysts at Edelweiss Research, the Nifty can move up further on successful advance to 5,300, which should ensure further upside till 5,600. The breakout level of 5,180 should remain a good support and the Nifty can go down to 5,105 if can break the 5,180 level.