Volume-based support seen around 5,460

As expected, the bears were in full command on Tuesday and took the Nifty future near the extreme support level at 5,500, with the help of weak global cues and across the board selling in key stocks futures. The Nifty July futures settled at 5,526, below the most crucial support level at 5,530, and, hence, we may see fresh sell-off on Wednesday if the global cues remain weak. The market is now firmly in the bears’ hands, and, hence, if selling pressure escalates, there is a possibility of the Nifty moving below 5,500. The volume-based support is visible around 5,460, but, the price-based sell-off in the last three trading sessions may take the Nifty futures around 5,390.

No wonder, there was a significant high volume in the 5,300-5,400- strike put options as participants expect the weak undercurrent to continue for some more time. The open interest (OI) build-up in these put options also suggests fresh weakness into 5,300. The weak undercurrent, also seen from the fact that the futures settled below the lower band of value area in two consecutive days, with 85 per cent volume below 5,575, indicates selling pressure from other time-frame traders. The initial balance range (5,550-5,590) saw change of hands and a strong sell-side volume from top traders, and, hence, we should expect strong resistance above 5,550.

The market on Monday saw a strong selling initiative from other time-frame traders and floor traders. The Nifty opened and moved considerably below the previous day value and stayed below the value area, indicating a strong bearish signal. According to value area basics, the best strategy on a day exhibiting initiative selling is to sell bounces until proven wrong. The Nifty July futures settled at a 14-points premium to spot while OI remained unchanged at the previous level, indicating entry of new other time-frame traders.

Infosys Technologies, HDFC Bank and Larsen & Toubro (L&T) closed on a weaker note, and, hence, we may see fresh selling in these stocks on Wednesday. The downside for Infosys is placed at Rs 2,720, while the volume-based recovery may end around 2,827. L&T saw 66 per cent TPO count above point of control (PoC- 1,788), and, hence, it was a net selling day. The July futures of L&T may see fresh correction around 1,747. HDFC Bank is poised to trade below 2,500, with volume-based sell-off possibly ending around 2,450.