Closing above short-term supports

TECHNICALS

The weekend's session began on a brittle note and ended with minor losses following a bout of profit taking by short-term players.

Traded volumes were thin compared compared with the previous session and the 10-day average.

The market breadth was marginally positive as the ratio of advances to declines on the Bombay Stock Exchange and the National Stock Exchange combined stood at 1221: 1138.

But the capitalisation of the breadth was negative as the figures on the two exchanges taken together stood at Rs 2,416 crore (advances): Rs 3,682 crore (declines).

Derivatives data available for the previous session show a 6 per cent rise in open interest after a boost to the outstanding long positions in the futures segment.

The indices have managed to close above their short-term support levels and that is a sign of comfort in the near term for the bulls.

The immediate floor for the indices is at the 1522 and 4845 levels on the Nifty and Sensex, respectively.

On the upsides, 1566 and 4945 will be the immediate hurdles for the Nifty and the Sensex, respectively, in the near term.

Should the indices close above these levels, there is a possibility of a further upmove in the near term.

The coming few sessions will determine the post budget market moods and therefore traders must keep their ears to the ground for changes in traded volumes, breadth and open interest.

The outlook for the markets on Monday is that of cautious optimism as the markets gear up for the budget ahead. The trade is likely to remain rangebound with the above mentioned bands acting as threshold levels.

I would advocate an exposure to equities via options only, rather than risk naked exposure to futures, in view of the high volatility ahead. Trades must be initiated on low volumes for conservation of capital.

Vijay L Bhambwani
CEO, BSPLindia.com

The author is a Mumbai-based investment consultant and invites feedback at vijay@BSPLindia.com or (022) 23400345 / 23438482.

Sebi disclosure: The analyst has no exposure to the scrips mentioned above.