Volume-based upside around the 6,137 level

As expected, the Nifty rose smartly after getting support at 5,750 on short coverings and expectations of a strong fourth-quarter earnings growth for banks, automobiles and oil companies.

State Bank of India, ICICI Bank, Reliance Industries, Larsen & Toubro closed at the day’s high on short coverings. Earlier, we had indicated weakness in the market and hinted at a fresh sell-off around 5,750. The Nifty surged vertically after getting support at the lower level on volume-based short coverings.

The Nifty April futures closed at a 16-point premium to spot and saw short coverings of around 1.50 million shares during the intraday session and fresh long build-up of 1.70 million shares at close. The market picture chart points of a price-based rally around 5,977 and volume-based upside around 6,137. The strong support is expected to come around 5,834. The spot Nifty could move up around 5,952 and lower-end support is seen at 5,837.

The market profit of the day suggests strong responsive buying at lower levels. This occurs when the market opens below the value area and buyers immediately start entering the market. This is witnessed by prices moving higher from the open, as buyers “respond” to price below value. The Nifty April futures opened at 5,758, which was below the day’s value area (5,806-5,908) and closed above the value area at 5,944. Also, buying tail was seen below yesterday’s value and we can call it responsive buying.

The options traders covered short positions in the 5,800-5,900-strike call options and initiated some long positions in the 6.000-6,100 strike call options, as they expect the Nifty to be strengthen further in the near future. The 5,900 put options added 2.77 million shares and 6,000 put options added 1.23 million shares in open interest, mostly through sell-side trades which indicate strong undercurrent. However, open interest build-up at 5,800-strike put suggests the Nifty may get strong support at that level.

The Bank Nifty is expected to move up around 12,055 and is likely to get support at 11,710. The April futures of State Bank of India may see volume-based upside around 2,909, while support is seen at around 2,800. ICICI Bank is expected to get volume-based upside around 1173, while support is seen at 1,100.