The bourses opened sideways and proceeded to trade lower through the latter part of the session. The Bombay Stock Exchange (BSE) sensex ended the day at 3230.14 (down 40.22 ) levels and the National Stock Exchange (NSE) Nifty 50 ended the day at 1055 ( down 22.90 ) levels.
The breadth was negative as the combined figures on both the exchanges was 624:1772. The traded volume on the BSE was Rs 1,815 crore, while on the NSE it was Rs 3,721 crore.
Players saw the much anticipated correction set in finally and the brunt was taken by the index heavyweights such as Reliance Industries, Infosys Technologies, Tata Engineering, Satyam Computer Services and Hindustan Petroleum Corporation.
The fall was marked by heavier volumes and a highly negative breadth. The contrast worth noting is the magnitude of bearishness as signalled by the breadth, which shows absolute fear compared with absolute greed up to yesterday.
This leads us to the conclusion that stocks which saw a large-scale speculative build-up of positions are likely to see panic-driven sales orders. The outlook for the trading session on Wednesday is that of slight nervousness as the market has seen profit taking at the significant recent high of 1087 on the Nifty.
Since the Nifty was unable to surpass that recent resistance zone, a consolidation post profit-taking should ensue.
Infosys, Satyam Computer, Reliance, Tata Engineering and Tata Steel may see somewhat lower levels and bull unwinding.
The Nifty itself should see support at the 1030 levels, give or take 5 points at the outside. Your call of action should be to buy on declines rather than sell short as the markets are in a bull grip. The best bets would be Reliance, Tata Engineering and Infosys on significant declines.
Quantities should be limited to 30-35 per cent of the entire investible float. Derivative traders can try bear call spreads on the Nifty to exploit any downside.
Vijay Bhambwani
(CEO-BSPLindia.com)
The author is a Mumbai-based investment consultant and invites feedback at vijay@bsplindia.com.
Sebi disclosure: The author has no exposure in any securities mentioned above.
