Fed meet, crude oil inventory hold the key

TECHNICALS

The markets opened on a steady to optimistic note and went belly-up after the CRR hike announcement. The short-term bulls were seen locking in gains as indices were in the blue-sky zone. The traded volumes were higher as the distribution at higher levels gained momentum.

The market breadth was negative as the BSE and the NSE combined advance-decline ratio was 1472:2417. The capitalisation of the breadth was positive as the commensurate figures were Rs 21,888 crore: Rs 13,737 crore.

The F&O data for Monday indicated a rise in the open interest with a spike in the PCR and implied volatility "" negative signals for short-term players.

The indices have closed at the lower end of the intra-day range as the unwinding bias persisted till the fag end of the session. The 5,862 pivot, which was advocated yesterday as a critical level to watch, was violated.

This raises the probability of the short-term outlook remaining under pressure. The coming session will witness an intra-day range of 5,960 on advances and 5,745 on declines.

The bearish pivot will be the 5,894 level and as long as the Nifty spot remains below this level, expect the bulls to be on the back foot.

In case markets decline on Wednesday, mark the correlation between the traded volumes and market breadth for signs of a build-up in the downward momentum.

The outlook for markets on Wednesday is that of guarded optimism. Overseas cues from equity and commodity markets will play a critical role now. There are multiple triggers in the pipeline like the Fed meet and the crude oil inventory data announcement. It means higher volatility. Cut back on speculative positions.

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.

Mandatory disclosure: the analyst has no exposure to any scrip/s mentioned above.