Not daring to follow up

TECHNICALS

The markets opened on a weak note and proceeded to trade lower through Tuesday. The benchmark indices shed almost a per cent as bulls displayed a lack of conviction where follow-up buying goes.

The traded volumes were lower than in Monday's session.

The market breadth was highly negative as the ratio of advancing to declining shares on the Bombay Stock Exchange and the National Stock Exchange combined stood at 1143 : 2033 and the capitalisation of the breadth was Rs 3,067 crore: Rs 4,441 crore.

The F&O data for the previous session indicate a big build-up of long positions, which seems to have been unwound by tired bulls.

The indices have retraced once again from their all-time highs, which are now a confirmed formidable hurdle.

The 2100 and 6714 levels on the Nifty and Sensex, respectively, will be the resistance zones for the indices in the absolute near term.

Support at lower levels should be seen at 2064 and 6624 in the coming session.

Should the indices fall lower than these levels, expect general weakness to permeate into the undercurrent.

Traded volumes need to be monitored closely as the key to broader market actions will be retail participation. The fall on Monday has been on lower volumes, which is a positive indicator.

The outlook for the markets on Tuesday is that of caution as the bulls are on the back foot and are unlikely to offer significant support at lower levels.

I would advocate trading the Nifty and prudent investors may write the deeply out of money puts on the Nifty in the near month series to avail of premiums thereon.

Exposure must be limited to avoid risk to capital.

Vijay L. Bhambwani
(CEO - BSPLindia.com)

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

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