Bulls on the defensive

TECHNICALS

The markets started trading on a shaky wicket and ended the day with almost 1.5 per cent losses after a panic selloff.

Traded volumes were higher compared with the previous session and in line with the 10-day average.

The breadth was highly negative with the advances to declines ratio on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) taken together standing at 819 : 1821.

The capitalisation of the breadth was equally negative as the combined exchange figures were Rs 2,311 crore: Rs 6,317 crore.

The derivatives figures available for Monday's session show a marginal rise in outstanding long positions by about Rs 200 crore.

That is a sign of concern as there is a lack of conviction by bulls at higher levels. Traded volumes in the futures segment was lower than in the previous session.

The indices have been unsuccessful in surging past their near-term resistance levels, which were at the 5970 and 1905 on the Sensex and the Nifty, respectively.

The intraday highs of the session will now be the short-term resistance levels for the markets, which need to be surpassed with higher volumes.

The upmoves must be accompanied by positive breadth and higher long positions in the F&O segment.

The support on the lower side will come at 1830 and 5770 levels on the Nifty and the Sensex, respectively, in the coming two sessions. The technology sector will continue to be a drag on the indices as predicted.

The outlook for Wednesday is of caution as the bulls are clearly on the defensive and the index heavyweights are under pressure.

The markets may take up to two sessions or more to recoup the losses. Caution is advocated as the undertone is brittle and volatility is higher due to poor volumes.

I continue to advocate selling Nifty straddles at conservative strike prices and in minimal lots only.

Vijay L Bhambwani is 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 author has no outstanding positions in any of the stocks mentioned above.