Nifty looks weak at higher levels, resistance at 2800-2825

Though Indian markets extended gains on Monday on the back of buoyant cues from the global markets, traders are not building long positions at higher levels as they are not comfortable with the current rally. Analysts see the current rise as a bear market rally and are expecting a good amount of correction in the coming days. Citing the reasons why traders are not comfortable with the rally, Sunil Mehta of Flexion Advisory said, “Despite a strong rally in last couple of days players are shedding their longs and booking profits at every high. The Nifty March futures on Monday witnessed profit-booking at higher levels as only 9.47 lakh shares were added to the open interest at close compared to the intraday addition of 49 lakh shares.” Extending the winning streak, Indian stocks rallied for the second consecutive day Monday as players covered short positions and formed significant long positions on the back of buoyant cues from the global markets. National Stock Exchange’s 50-share Nifty jumped 2.13 per cent to close the day at 2777.25. Nifty March futures discount remained unchanged at 3 points to spot from Friday. The contract price rose 2.14 per cent and added merely 9.47 lakh shares in open interest from 49 lakh shares intraday. The buy quantity was higher than the sell quantity, suggesting massive short covering and little build up of long positions in the contract. On the options front, unwinding of short calls was seen at 2800 and 3000 levels and call buying was observed at 2900 strike. However, small amount of build up was seen at these levels which indicate that players are not comfortable and expecting a strong resistance for the markets at 2800-2825 in near term. On the other hand, solid put writing was observed at 2700 and 2600 levels which should act as a strong support for Nifty in the near term. At lower strike, puts unwinding of short puts was observed at 2500 and little put buying witnessed in 2400 level indicating if Nifty breaches 2600 levels it may touch 2400 level. “For the Nifty the major resistance is at 2,811 (50 DMA) and 2,859 (100 DMA) levels,” said Alex Mathew, head research, Geojit Financial Services. For the Sensex, 90 days moving average is currently placed at 9275 and can act as a strong resistance. Hence, the resistance levels at 9275 should not be ignored for booking profits at higher these levels. I will advise players to book major profit at this current rally and will look for market behavior at that level before taking any fresh position in the market. For Nifty March futures 2800 should act as a strong resistance followed by 2,816, 2,846 and 2,876 levels,” said Arvind Pandye, analyst at Global One Wealth Advisory. Markets will remain volatile in the next few trading sessions as it will look for directions from global and domestic cues. Given the likely volatility in the near term, one must watch the trends and play accordingly,” Pandye added. On Monday, as per NSE data, foreign players have net bought index futures worth Rs 647 crore and index options to the tune of Rs 172 crore.
Source: ET