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| Traded volumes were a tad lower than the 10-day average as a larger section of the retail participants abstained from large-scale commitments.
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| The breadth widely negative as losers outnumbered gainers by at least 45 per cent.
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| The indices have topped out on an intra-day basis at nearly the April 2001 highs, which was a significant high of the bear run.
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| That makes these levels crucial for the short-term outlook.
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| The Nifty will continue to encounter resistance in the 1390-1405 band, which will see unloading of bull positions. Profit taking is likely to accelerate at these levels. The commensurate level on the Sensex is 4355-4375. On the downside, the correction is likely to be arrested at 1324 on the Nifty and at 4235 on the Sensex.
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| Sector-specific activity will see outflows from the automobile (four-wheelers ), steel, telecom and some pharmaceutical stocks as the money flow index for these sectors is showing selling pressure from smart money. Inflows may continue in the oil & gas sector, cement, technology and to a degree in the software segment.
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| However, the upsides being capped to 1400 levels on the Nifty in the short term, and the risk-reward ratio is not very favourable for a fresh entry at current prices.
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| Trailing stop-losses need to be maintained at 2 per cent from the recent highs and partial profits need to be booked wherever available. The outlook for Wednesday is of caution as the corrective selling may just gain momentum.
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| Though the downward correction has been widely anticipated, the actual onset of the same may see a build up on the downside as the outstanding positions in the F&O are fairly stretched in favour of the bulls.
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| With high margin payouts, it is getting increasingly difficult for bulls to execute fresh long commitments.
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| Among stocks, ACC has been building upward momentum and is likely to remain bullish as long as it remains above Rs 222 levels.
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| Expect the immediate minor hurdle to be at Rs 226 levels, above which, the stock goes into a low resistance zone. The stock being a market out-performer in the short term, I advocate a buy in the cash and derivative segments in small lots.
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| And as long as Bharat Heavy Electricals manages to stay above Rs 348 levels, expect the uptrend to continue.
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| The scrip is exhibiting extremely high relative strength and should see a minor correction if the markets fall. Buying is recommended for delivery investors and options players who can buy out of money near month calls.
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| Traded volumes should be curtailed in view of high volatility in the markets.
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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.
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| Sebi disclosure: The analyst has no exposure to the scrips mentioned above. |
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