After opening on a negative note, the markets trended lower as the RBI rate hike strengthened the bears’ “morning attack” formation. The indices witnessed a near 4 per cent decline as the bulls withdrew support in an abject surrender.
The market breadth was absolutely negative as the BSE & NSE combined advance decline ratio was 1274 : 2572. The capitalisation of the same on a commensurate basis was Rs 2053 crore: Rs 14,543 crore.
The indices have closed at the lower end of the intraday range, that too on expanded volumes and negative market breadth. These are bearish indicators and seem to point towards a continued weakness in the absolute near term. The 4400 / 4240 range advocated for Tuesday was violated on the downsides and the Nifty has closed below the support specified.
The weight of evidence indicates a scenario of overhead supply as trapped bulls endeavour to exit on upthrusts, especially since the July series is drawing to a close and rollover would entail adding on to the holding on costs. The coming session is likely to witness a range of 4295 on advances and 4050 on declines. As long as the Nifty spot remains below the 4225 threshold, expect weakness.
The outlook for the markets on Wednesday is that of a guarded outlook. Should the international cues be very positive, some lost ground may be salvaged by bear covering. Avoid the temptation of bottom-fishing for bargains.
Vijay L. Bhambwani
(CEO- BSPLindia.com)
More From This Section
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/s recommended above.