Lower volumes provide comfort

TECHNICALS

Opening on a firm footing, the markets flattered to deceive the bulls as the closing was lower than the opening. That the indices surrendered their early gains was not as critical a matter as was the fact that the lower top and bottom formation was seen on the benchmarks.

The lower traded volumes provided mild comfort as panic sales were absent. The ratio of number of trades versus the total traded volumes indicates a domination by institutional players and the HNI's who traded selectively.

The market breadth was expectedly negative as the BSE & NSE combined advance decline ratio stood at 1521 : 2086. The capitalisation of the breadth stood at Rs 4625 crore: 5659 crore.

The indices have closed at the lower end of the intraday range and the 4209 resistance that I had advocated over the weekend which must be overcome remained inviolate as the Nifty retraced from the 4208 levels.

The coming session(s) will witness a resistance at this critical short term congestion level as the overhead supply is likely to be significant at this juncture.

The bulls will need to defend the 4120 - 4100 band very vigorously if they are to succeed in staving off the bears in the near term. The markets are in a choppy and tentative mode with a lack of clear direction.

Normally such periods of linear consolidation are followed by bigger moves. Keep watching the average traded price of the near-month Nifty futures, traded contracts versus total turnover ratios and the open interest for signs of short term trend determination.

The outlook for Tuesday is that of caution as the bulls are on the back foot and continue to lack the fire power to overcome the bears convincingly. Remain off aggressive purchases for now.

Vijay L. Bhambwani
(CEO- BSPLindia.com)

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

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