Short covering cushion falls

TECHNICALS

The indices ended the session with minor losses on very thin volumes on Monday. The benchmark indices shed 0.10 per cent at closing and the intraday lows were higher than the Friday's lows.

The traded volumes were atleast a third lower than the previous session which shows an absence of panic sales. The market breadth was highly negative as the BSE and NSE combined figures were 766 : 2533 and the capitalisation of the breadth was also negative as the figures on a BSE & NSE combined basis were Rs 3029 crore : Rs 3931 crore.

The indices held ground above the intraday lows of Friday as the larger number of players adopted a wait and watch attitude.

As long as the Nifty and Sensex stay above the 2558 and 8434 respectively, the chances of a rapid recovery are fair.

A fall below these levels on a closing basis will take the indices to the 2496 and the 8318 levels in the coming few days.

So far, the price and volume action shows a lack of large scale selling which makes the current weak phase a bull market correction. A close above the 2603 and the 8586 levels will signal a fresh short term uptrend.

The outlook for the markets on Tuesday is that of continued caution as the bulls are unlikely to buy in large numbers till there is over head supply and bear hammering. Falls are being cushioned by short covering and the downsides are well defined from the current levels.

Stock specific activity is likely to be seen on ITC which is showing higher relative strength. Buying is recommended for the patient investor / trader in the cash and derivatives segment is 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 ) 23438482 / 23400345.

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