A distinct lack of panic

TECHNICALS

The markets opened on a flat note ended the week with minor losses as players avoided making fresh commitments on the penultimate session of the week.

Traded volumes were lower compared with Thursday's session and the 10-day average. The market breadth was positive as the ratio of advancing to declining shares on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) combined were 1728 : 1198.

The capitalisation of the breadth was positive as the combined exchange figures were Rs 3,228 crore : Rs 2,578 crore. Derivatives data available for the previous session indicates a fall in outstanding long positions as the players squared up positions ahead of the impeding expiry of the September series.

The indices have closed a shade lower, but managed to remain above their 200-day simple moving average and their short-term supports, which are at 1692 and 5490 on the Nifty and the Sensex, respectively.

The resistance on the upsides will be at 1744 and 5584 in the coming session. Traded volumes have been lower on the falling market days which shows a lack of panic sales in the undertone.

Traded volumes have been higher in this week compared with the previous week and that is a positive indicator. The outlook for the markets on Monday is that of cautious optimism as the technical correction is likely to see a minor consolidation as the lower levels will see short covering from the bears as the heavy short sales need to be squared up ahead of expiry.

The bulls are showing a tendency to lend support at lower levels and profit sales near the channel tops of the bullish channel. Till such supply on the upsides is not absorbed completely, a fresh upmove is unlikely in the short term.

Stock specific activity is likely on Reliance Industries, which is likely to determine market trends in the coming sessions. Buying support is likely at 2 per cent declines and buying is recommended in small lots in the cash and derivatives segment for the medium term.

Vijay L Bhambwani (CEO-BSPLindia.com)

The author is a Mumbai-based investment consultant and invites feedback at vijay@BSPLindia.com or (022)23400345/23438482.

Sebi disclosure: The analyst has no exposure to the scrips mentioned above.