Scaling exposure on expiry eve

TECHNICALS

The markets opened on a brittle note and ended Thursday's session by clocking sharp falls as bulls preferred to pare their exposure at higher levels.

The traded volumes were lower compared with Wednesday's session, but in line with 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) taken together stood at 1118 : 1743.

The capitalisation of the breadth was also negative as the figures from the two bourses combined stood at Rs 1,203 crore (advances) : Rs 5,770 crore (declines).

Derivatives data available for the previous session indicate a slight reduction in exposure across index heavyweights as the impeding expiry of the September series will see squaring up of contracts.

The indices have fallen marginally to retrace near their 200-day simple moving average and the outlook is that of a routine correction as long as the rising tops and bottoms formation is intact.

The Nifty is likely to get support at 1711 and the Sensex at 5514 in the coming session.

Below these levels, the outlook could turn weak in the short term. Upsides are likely to see resistance at 1745 and 5574 on an intra-day basis on the Nifty and the Sensex, respectively.

Traded volumes need to remain firm to signal continued retail participation.

The outlook for Friday is of cautious optimism as the markets will see bulls booking profit at higher levels and supporting values at lower levels.

This period of consolidation is likely to last for 1-3 sessions before an upmove can recommence. Barring savvy traders, short selling is not advisable as the undertone still remains positive. Traded volumes should be kept low due to high volatility.

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.