Upsides will see resistance

TECHNICALS

In an extension of the previous session's upmove, indices surged to record new highs. The fact that indices rallied with higher traded volumes and a marginally positive market breadth, signals strength in the undertone.

The Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) combined advance decline ratio stood at 1842 : 1620. The capitalisation of the market breadth also points towards a bullish bias as the combined exchange figures stood at Rs 7264 crore : Rs 2493 crore. Higher volumes were clearly the most positive aspect of Tuesday's trade.

The indices are now at the upper trendline of the bullish channel. The next two sessions will determine the immediate trend of the markets.

Should the Nifty rally, the upsides will see resistance at the 2519 and the Sensex at the 8244 levels on an intraday basis. The support on the downside will see levels of 2481 and the 8148 on the Nifty and Sensex respectively.

The action will continue to be seen on banking, energy and commodity plays. Traders must keep an eye on traded volumes. Any downward correction must be on lower volumes if the uptrend is to gain momentum.

The outlook for the markets on Wednesday is that continued optimism as bulls are likely to be aided by short covering by encircled bears. Downsides are therefore limited in the near term. Stock-specific activity will be seen on SBI, Bank of Baroda, Ballarpur Inds and Corporation Bank on the bullish side. Long positions maybe initiated in the cash and derivatives segment in small / medium 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.