As expected, the Nifty moved between support (5,400) and resistance (5,510), and closed at 5,481 on short-covering by bears. The rally from the low of 5,180 was driven by short-covering and formation of some long positions in index futures by foreign institutional investors. The derivatives data suggest selective buying in futures of index heavyweights such as Reliance Industries, ICICI Bank, State Bank of India and Tata Motors.

The market has seen a significant recovery in the last three sessions on the back of short-covering and there is time for some pause. The Nifty is expected to consolidate at 5,420-5,470 and face strong resistance above 5,500. The rally will eventually end around 5,570, the 100 per cent retracement level of the current fall. Options traders covered short positions in the 5,300-5,400-strike call options, which indicates limited downside from the current level. unwinding intra-day. This clearly means short-covering by bears. There was significant build-up in the 5,400-5,500-strike put options, mostly through sell trades. Buying in the 5,500-strike call options and selling in the 5,600-strike put options suggest a strong breakout above 5,570.

The market picture chart hints at upside resistance at 5,550 and lower-end support at 5,400. The spot Nifty is expected to get time price opportunities (TPO)-based resistance at 5,565 while volume-based support is seen around 5,380. The Nifty February futures saw strong selling above 5,480. The market would now move into the consolidation mode in the near term and might target 5,480 with overshoot limited to 5,550-5,570.

The TSM showed buying in the value area (5,428-5,470), with 60 per cent volume, and also in the initial balance range (5,420-5,470).

Among stock futures, Reliance Industries may see volume-based upside at Rs 970 and TPO-based support at Rs 928. ICICI Bank may see consolidation at 1,036-1,056 with upside clipped around 1,071. State Bank may move up to Rs 2,812-2,822 and find strong support at 2,627.