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| The indices ended with minor gains to end in positive territory as the traded volumes were higher than the previous days figures.
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| The market breadth was marginally negative as the BSE & NSE combined figures were 1299 : 1390. The capitalisation of the breadth was highly positive as the combined exchange figures were Rs 5547 crore : Rs 2486 crore. This shows a buying polarisation on the index heavy-weights to prop up the indices.
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| The indices have managed to close above their short term supports at the 1635 and 5135 levels for the Nifty and Sensex, respectively.
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| That should be a source of comfort for bulls as the short term correction has seen little or no attrition in values.
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| The immediate supports for the indices remain at the previous tops at the 1630 & 5135 levels. On the upside, expect resistance at the 1685 and 5230 on the Nifty and Sensex.
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| The markets are likely to see continued profit taking at higher levels as weaker bulls bale out of positions. The undertone overall is likely to remain positive.
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| The outlook for the markets on Wednesday is that of cautious optimism as the follow up buying support is likely to be seen in select frontline heavyweights.
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| The derivatives segment shows a paring of long positions in the stock futures and a commensurate build up of stock options.
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| That is a sign of defensive long buying by the retail segment. There is unlikely to be any explosive upmove till there is a strong buying conviction.
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| Stock specific activity is likely to be seen in- Hero Honda - This counter has given a breakout signal above 400, and as long as it stays above this level, expect the scrip to remain firm.
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| Since the undertone is likely to be cautious, I would advocate buying calls or selling puts at out of money strikes to avoid a large exposure to your capital.
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| Reliance - As long as this counter remains above 506, expect the undertone to be firm and the next target for the counter to be at the 514 levels.
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| This stock has been advocated by us a market leader time and again and traders may buy in the cash and derivatives segment.
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| Traded volumes must be curtailed to preserve capital.
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Vijay Bhambwani
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| CEO - BSPLindia.com
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| The author is a Mumbai based investment consultant and invites feedback at vijay@BSPLindia.com or ( 022 ) 23438482 / 23400345.
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| SEBI disclosure: The author has no outstanding positions in any of the stocks mentioned above. |
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