I had advocated over the weekend that the bulls had to overcome a wall of worry as the technical picture was extremely weak. The markets reacted painfully to the overseas cues as the indices opened with a gap-down, and continued to slide for the most part of the session.
The market breadth was negative as the BSE & NSE combined breadth was 448 : 3,425. The capitalisation of the breadth was also negative on a commensurate basis as the figures were Rs 1,162 CRs : Rs 15,126 Crs.
The markets have closed at the lower end of the intraday range on lower volumes, attributed to a gap-down opening. The 4,300-4,120 range advocated for Monday was violated as the Nifty spot closed below this threshold convincingly. This is in line with a head-and-shoulder pattern that was established and activated on Friday.
The coming session is likely to witness a range of 4,180 on advances and 3,900 on declines, a continued declining daily range. The bulls will need to keep the Nifty above the 4,130 level consistently if the trend is to recover in the near term.
The market internals indicate a lower turnover as the participation levels fell due to the weakness. The number of trades increased and the average ticket size was lower. The capitalisation of the market was lower in line with a downtick session. Avoid bottom-fishing even at these levels, unless buying with a 24-month view.
Vijay L. Bhambwani
(CEO- BSPLindia.com)
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.