Nifty may not see sharp fall in near term

As expected, the Nifty moved closer to 5,400 but could not remain at higher levels due to profit-booking by institutional players. The index closed in a Doji pattern, indicating indecisiveness at current levels. The trading pattern in index futures and options indicates strong resistance above 5,400.

Nifty April futures saw change of hands, mostly through a mix of buy and sell trades from bulk buyers, indicating short-covering and creation of short positions at higher levels. In the end, the April futures closed on a par with the spot and shed 398,450 shares in open interest, mostly due to profit-booking.

The time-price opportunity (TPO) chart indicates a non-trend day, a day when a security’s trades are clustered around the mean of normal (bell-shaped) distributions.

The value area (the band in which 70 per cent-plus volume or time-price opportunity are executed) saw 78 per cent volume executed in a band of 5,355-5,375, mostly through change of hands. The TPO chart indicates the index may face resistance around 5,400. The TPO support on the basis of volume is at 5,343. This means the Nifty may not see a sharp correction in the near future.

However, profit-booking in the 5,300-strike call and fresh short build-up in 5,400 calls suggests narrow movement going ahead. The 5,300-strike put has been adding substantial open interest, mostly through buy-sell trades, with high volume indicating creation of short positions and hedging of long positions by institutional players. The support for the Nifty based on open interest in put options is expected around 5,200 as this put holds the maximum open interest among put options.

Among stock futures, BHEL, HDFC, ICICI Bank and Reliance Communications saw strong buy trades from institutional players. The price projection using volume indicates support for ICICI Bank around Rs 984 with an upside target of Rs 1,005. BHEL is expected to move around Rs 2,585 as it closed above the value area for the day with more than 40 per cent volume above Rs 2,525. Reliance Communications looks strong and is expected to move around Rs 182. HDFC is expected to move around Rs 2,852 from the current close of Rs 2,822.