The new derivatives settlement began on a bearish note as the Nifty spot closed at its lowest level in calendar 2008. By itself, that is a sign of weakness that the bulls will need to encounter on all advances.
The market breadth was negative as the BSE figures were 442 : 2172. The turnover was lower due to the prevalent weakness as the retail traders were kept at bay. The weekend session was advocated to keep exuberance curtailed but the downtick appeared to have taken the bulls by surprise.
The indices have closed at the lower end of the intraday range and that too on negative market internals. The intraday range advocated for Friday at the 4170 / 4040 levels was violated on the downsides as the Nifty closed below this threshold by a wide margin.
The coming session is likely to witness a range of 3880 on declines and 4050 on advances. The likelihood of the Nifty testing the erstwhile head and shoulder price objective of 3800 in the coming days is possible. The bulls will have to keep the Nifty spot above the 4020 levels consistently to keep the session buoyant, which is likely to be no mean task.
The outlook for the markets in the near term is that of declines and bottom fishing must be avoided. Should the overseas markets also close in the red, the weight of evidence in favour of further declines will gather momentum. Preserve capital in the near term.
Vijay L. Bhambwani
(CEO – BSPLindia.com)
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The author is a Mumbai-based investment consultant and invites feedback at vijay@BSPLindia.com
Mandatory disclosure: the analyst has no exposure to any scrip recommended above.