Bulls go on the defensive

TECHNICALS

The markets kicked off on an optimistic note but ended Tuesday's session sober amid rangebound trading due to lack of retail participation.

Traded volumes were sharply lower compared with the previous session and the 10-day average. The market breadth was negative as the ratio of advancing to declining shares on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) combined stood at 1100 : 1450.

Interestingly, the capitalisation of breadth was almost even as the figures on the two bourses taken together stood at Rs 2,967 crore: Rs 2,907 crore.

Derivatives data available for the previous session show a fall in open interest as the outstanding long positions in the futures segment has come down and a marginal gain in the options segment is seen.

This means the bulls going on the defensive ahead of the expiry of the April series.

The indices have seen a lower bottoms and tops formation, which signals a scenario where sentiment is under pressure in the near term. Poor traded volumes are testimony to abstinence by the retail segment. Till the elections are over, no significant movement should be expected from the markets.

The support will come on the downsides at the 1825 and 5745 levels on the Nifty and Sensex, respectively. On the higher side, expect resistance at the 1864 and the 5840 levels in the immediate future. Traded volumes and market breadth need to be monitored closely.

The outlook for Wednesday is of cautious optimism as the overall picture is that of low volumes and higher volatility and impact cost of acquisition.

Among stocks, ICICI Bank has been bucking the lacklustre trend in the markets since the last two sessions and should it trade conclusively above Rs 308-309 levels with higher volumes, we expect a 3 per cent appreciation in the near term. Buying is recommended in the cash and derivatives segments in small lots.

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.