The markets saw a technical correction today taking the Sensex to 2885.23 points (up 50.82) and the Nifty to 936.90 points (up 14.20).
This came with higher traded volumes and a highly positive market breadth. The Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) combined advance decline ratio was 1290:765, and traded volumes were higher at Rs 1428 crore and Rs 2718 crore on the BSE and NSE, respectively.
The rally was led largely by the technology stocks which are showing good resilience on the back of a relatively firm Nasdaq.
If the Nasdaq composite continue to power above 1350 for three consecutive sessions, frontline domestic technology stocks should also see some movement.
The indices may see a continuation of the upward trend as the index composite stocks are in a pullback mode led by Reliance Industries, Infosys Technologies, Satyam Computer and Hindustan Lever Ltd.
These stocks were battered in the last three sessions and any upward move on these counters will see a surge in the indices purely on weightage factors alone.
The Sensex will see resistance coming at 2906 points and then at 2953 levels whereas the Nifty 50 should see selling pressure at 948 and 956 levels.
However, remember that this is still a bear market relief rally and the upward movements have a tendency to crumble without a warning. For the moment, the index is showing an oversold level oscillator reading which is moving upwards. On individual stocks, Reliance Industries and MTNL are showing promise for a limited upward movement. Reliance can hit the Rs 236-238 mark before a selling/profit taking wave hits it and MTNL may just touch the Rs 97-98 levels.
Digital Global may surprise traders by hitting the Rs 525 level in case the overnight US markets are firm. This is due to a bar reversal it made on the charts yesterday.
If the Infosys stock trade above Rs 3,830, it could flare up as the stock has been relatively subdued and has been trading in a short-term downward mode in the last fortnight.
The short-term momentum oscillator has given a buy-signal after hitting a short-term oversold level and it is an encouraging sign.
I would still advocate limited exposure as higher volumes in a pullback rally should be avoided due to chances of a whipsaw.
Vijay Bhambwani
(CEO -- BSPLindia.com)
Sebi disclosure :- The author has no exposure to any securities mentioned above.
The author is a Mumbai-based investment consultant and invites feedback at
