Short sellers to cushion fall

TECHNICALS

The markets opened on a firm note and proceeded to extend previous day's losses through the day. The benchmark indices closed with almost 0.5 per cent loss as unwinding at higher levels capped gains. The traded volumes were marginally lower than the previous session, which indicates a lack of panic sales.

The market breadth was highly negative as the BSE and NSE combined figures were 928 : 2454 and the capitalisation of the breadth was also negative as the figures on a BSE & NSE combined basis were Rs 5,519 crs : Rs 7,509 crs.

The F&O figures for the previous session indicates an unwinding of long positions as the bulls pared exposure.

The indices have ended off their intraday highs and closed near the mid point. As was advocated yesterday, the indices have exhibited key reversals in the previous session, which are precursors to short-term weakness.

The intraday levels of the Nifty spot yesterday at the 3290 / 3234 were violated on the downside, which shows a selling bias. The coming session will see support at 3211.73 on declines and 3268.57 on advances.

Should the 3211.73 level be violated on the downsides, expect the next support at the 3193.53 on an intraday basis. Traded volumes must be watched carefully in the coming days as they will indicate the trader sentiments in the short term.

The outlook for the markets on Thursday is that of continued caution as upsides maybe met with profit sales. The only significant buying that may emerge will be from short sellers who will book profits on declines, thereby cushioning the falls.

A pullback rally may be seen, but it should be remembered that pullbacks terminate as abruptly as they commence. Temptation to bottom fish must be avoided.

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.