Fair chances of consolidation

TECHNICALS

The markets opened on a bullish note and succumbed to profit sales at higher levels through the day. Benchmark indices ended with a new high closing, but way off their intra-day perch.

The traded volumes were higher than the previous session, which shows a higher intra-day churn in the markets.

The market breadth was marginally negative as the BSE and NSE combined figures were 1,458 : 1,881 and the capitalisation of the breadth was positive as the figures on a BSE and NSE combined basis were Rs 10,429 crore : Rs 4,440 crore.

The F&O figures for the previous session indicates a bullish undertone as the open interest is showing signs of rapid increase and the put-call ratio is stagnant.

The indices have ended off their intra-day highs, while the CNX IT and CNX Midcap indices have actually signaled a key reversal pattern on the short term charts.

That calls for caution as I had advocated routine profit sales in the short term and the charts are indicating a slightly over bought situation.

The intra-day levels for the Nifty in the coming session are 3,122.21 on the downside below which, a fresh weakness can ensue and on the upside it is expected to go 3,179.19.

Only a close above the 3179.19-levels with heavy volumes and positive market breadth will raise the probability of the bulls being able to sustain the uptrend.

The outlook for the markets on Friday is that of continued optimism, though it is still advocated to be cautious, as the chances of a consolidation or routine profit sales are fair. All fresh trades must be initiated on lower exposure and with a strict adherence to stop losses.

Stock-specific activity maybe seen on Dr Reddy's, which is likely to witness defensive buying support as markets get volatile and there is a " flight towards quality", typical of markets that have had a good run upwards. Buying is recommended in the cash-and-derivatives segment for the patient traders looking at stable returns over time.

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.