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| The indices ended with one of the biggest gains in recent times on the back of institutional buying, which triggered off short-covering. |
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| The breadth was positive as the combined figures on both exchanges were 4:7 and the traded volumes were lower than the 10 day average. |
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| The price / volume ratio is suggestive of a lack of aggressive buying by retail investors. |
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| However, the fact that the Nifty has managed to close above the 1300 mark throughout the corrective phase and the Sensex remaining above the 4100 levels indicates that the worst is over. |
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| The capitalisation of the market breadth was even more positive than the numerical breadth which shows a secular buying momentum across the board. |
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| As I had indicated yesterday, the put:call ratio gave a key guidance to the correction as the ratio went from 0.25 : 1 to 0.22 : 1 during the three sessions which saw the largest attrition in values. |
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| This indicates that the medium-term investors still perceive the markets as bullish and prefer to roll forward their positions to the next month rather than square up their call contracts. |
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| The outlook for the trading session on Thursday is that of bullishness as the Nifty has surpassed its short term hurdle and is likely to test the 1390 levels once it surges past the 1378 levels. |
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| The commensurate levels on the Sensex will be the 4401 mark. On the downside, expect support on the Nifty at the 1337 levels and the Sensex at 4290 levels. |
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| The end of the derivatives series for September will see follow up buying occurring in the next month's contracts especially in the technology, automobile, oil & gas and pharmaceutical sectors. |
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| Among stocks, Hero Honda is entering a new trading zone above Rs 300 mark where there is almost no supply of paper. Buying is recommended in small lots with a stop-loss at Rs 291 levels once the scrip crosses the Rs 300 barrier with high volumes. |
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| Expect the next resistance at Rs 310 - Rs 312 levels. Buying is recommended in the cash and derivatives segments. |
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| L&T is making a similar chart pattern as Hero Honda and is likely to make new highs once a conclusive base is made above Rs 312 levels in intra-day trade. Should it surge with high volumes, expect the scrip to surge another 3-4 per cent. Buying is recommended in the cash and derivatives segments. |
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| Traders can buy slightly more aggressively as the outlook is bright - barring healthy corrections. |
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| Vijay Bhambwani |
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| CEO, BSPLindia.com |
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| The author is a Mumbai-based investment consultant and invites feedback at vijay@bsplindia.com. |
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| Sebi disclosure: The author has no exposure in any securities mentioned above. |
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