Nifty likely to face pressure at 5500 level

THE Nifty remained in the range of 5350-5500 for the fifth consecutive week. Weak US data as well as hawkish statements from the US Fed weighed heavy on the sentiment.
    However, better-than-expected results from the banking space provided much-needed support. Major economic data released in recent times both in domestic as well as US market have remained weak. In India, the industrial output rose 7.1% in June 2010, lower than the revised 11.3% rise in May 2010. In the US, an unexpected rise in jobless claims and a sobering revenue outlook from Cisco exemplified the hurdles to economic recovery.
    The highest Call and Put open interest is at 5300 and 5600, respectively. Nifty 5500 Call open interest is more than 90 lakh shares and is quite close to 5600 Call open interest. It suggests that the broad range will remain at 5300-5500. The later half of last week witnessed a fresh build-up in 5400 Put options, suggesting the Nifty may find immediate support at 5400. However, in Monday's session, unwinding was seen in 5500 Put options with an increased short build-up in 5500 Call options. It suggests that the Nifty may continue to find a stiff resistance at 5500 in the short-term. The India VIX made its all-time low closing level of 16.74 on Friday. It remained in the range of 16.74-18.11 for the whole week. Important supports may be tested, if VIX starts increasing above 20 levels. Otherwise, the continuance of the rangebound scenario in VIX may keep indices within the range.
    FII inflows have remained robust so far and no major sell-off was seen in the cash market. In the cash market, FIIs have bought approximately to the tune of Rs 13,200 crore since the beginning of this series. If this trend continues, the Nifty may not breach the major support of 5300 despite volatility spurting up.
    The banking sector has shown good momentum after better-thanexpected results from sector heavyweight SBI. If the Nifty does not hold the immediate support of 5400, profit-booking in banking stocks can't be ruled out. Oil marketing companies seem to have consolidated for fresh upmoves. IOC has already seen good rollover for the next series.