Back to the volume imperative

TECHNICALS

The markets opened on a cheerful note and proceeded to trade lower through Thursday.

The benchmark indices shed marginal weight as bulls preferred to book profit at higher levels.

The traded volumes were higher than the previous session and marginally above than the 10-day average.

The market breadth was highly negative as the ratio of advancing and declining shares on the Bombay Stock Exchange and the National Stock Exchange combined stood at 642 : 2713.

The capitalisation of the breadth was also negative as the figures on the two bourses taken together stood at Rs 3,195 crore: Rs 3,788 crore.

The indices have managed to hold their heads above water with the Nifty and Sensex closing above 2122 and 6900 levels, respectively.

The immediate supports are likely at 2108 / 2098 on the Nifty and 6874 / 6855 on the Sensex in the coming session.

The upsides could be capped at 2135 and 6932 levels on the Nifty and Sensex, respectively. Unless the indices break out above these levels, close higher consistently with higher volumes, a sustainable upmove will be difficult to achieve.

Volumes will play an important role in determining short-term trends "" as I have been advocating all along "" since it will tilt the scales in either direction.

The outlook for the markets on Friday is that of caution as the bulls are likely to be on the back foot and may be wary of offering support at lower levels.

Being a weekend session, buying is likely to stunted.

Expect weakness at higher levels and a continued selling bias on the midcap segment. Reliance Industries, which was recommended recently, has achieved its target objective and should be squared up for now.

Patient traders may start accumulating ITC July futures on all significant declines.

Traded quantities must be curtailed in view of higher volatility expected.

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.