Nifty consolidation seen at 5000-5200

The Nifty closed on Friday with a negative note on the back of less-than-expected IIP data, erasing early gains which had lifted the index to an 18-month high of 5182.

In a choppy week, the Nifty faced continuous resistance at 5180 and found support around 5070 levels. Most of the time, Nifty futures traded at a premium to spot, but ended the week at a discount. On Friday, the market witnessed the highest market volume in the derivatives segment for the week.

In stock futures, speculative and long-position build-ups were witnessed in many sectors like sugar, steel, IT, aviation and retail during the week. However, on Friday, some unwinding was seen in some select futures like Chambal Fertiliser, Crompton and Dena Bank. Future open interest increased for Shree Renuka, Alstom and Jindal Steel, indicating volatility ahead. Moving ahead, the Nifty with a low implied volatility (IV) of around 20% may consolidate further within the 5000-5200 range.

With more than 55 lakh open interests for 5000 Nifty Puts, the market would witness strong support at these levels, and with nearly 66 lakhs open interest at Nifty 5200 Calls, the market will continue to face resistance at this level. Having said that, the current liquidity position and market build-up of long positions at lower levels indicate positive bias with expectation of the Nifty breaching 5180 in the December series.

Jitendra Panda, Senior VP-Business, Associate Group, Motilal Oswal Financial