Bulls pausing for breath

TECHNICALS

The markets opened on a firm note and proceeded to trade lower through the day. The benchmark indices reversed gears and ended in the negative territory. Traded volumes were lower than the previous session which points towards an absence of selling panic.

The market breadth was negative as the BSE and NSE combined figures were 1355 : 2014 and the capitalisation of the breadth was also negative as the figures on a BSE & NSE combined basis were Rs 8,180 cr : Rs 4,341 cr. The F&O figures for the previous session point towards a minor build up of positions as the bulls remain optimistic.

The indices with the exception of the CNX Midcap index has exhibited key reversals as the closing levels are clearly lower than the opening levels. The traded volumes being lower is a saving grace as no excessive distribution was seen. As I had advocated on yesterday, the indices did run into a wall of selling at higher levels and a consolidatory phase has begun.

The intraday support on the Nifty is likely to be seen at the 3125.97 level on Monday, below which further weakness may be seen. The upsides are likely to be seen testing 3168.73, above which short covering and fresh buying may be seen. Traded volumes will be a key factor for the short term trend in Monday's session.

The outlook for the markets on Monday is that of abundant caution as the bulls are showing signs of pausing for breath.

Though no major reversal seems to be in sight, the chances of a routine consolidation/ profit taking can not be ruled out. I advocate an adherence to pharma scrips as the " flight to quality" is expected to continue in coming sessions. Dr Reddy's advocated yesterday maybe held for the short / medium term for further gains.

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.