Fresh open interest likely to pile up

TECHNICALS

The markets opened on a positive note and proceeded to trade lower through the day. The benchmark indices ended off their intraday perches as the bulls preferred to book profits on advances.

Traded volumes were higher than the previous session which indicates a churn in the markets. The market breadth was highly negative as the BSE and NSE combined figures were 1104 : 2268 and the capitalisation of the breadth was also negative as the figures on a BSE & NSE combined basis were Rs 10797 crore : Rs 4283 crore.

The derivatives data for the previous session show a marginal reduction in net long positions, which indicate a profit taking bias on advances.

Indices have witnessed profit sales after a six-day winning streak. That is a routine phenomena as advocated yesterday. That the Nifty has closed below it's pivot point is indicating weakness that could probably percolate to the coming session/s.

The 3317 support indicated yesterday has held and that is a sign of a slow drift rather than a rapid panic sale scenario. The coming session is likely to witness levels of 3389 on advances and 3319 on declines. The 3315-3320 band is assuming significant importance as it is a crucial short term retracement count threshold.

The outlook for Friday is that of abundant caution as the weekend session is unlikely to witness significant fresh open interest being built up in the immediate future.

Stocks with high open interest in near-month futures will be particularly susceptible to falls in the coming sessions. I advocate restraint from aggressive fresh long positions in the coming session.

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.