Nifty on a delicate perch

Technicals

The bourses opened on shaky terrain and closed the week's first session at significantly lower levels.

The nervousness was palpable and profit taking had a cascading effect on share prices.

The Bombay Stock Exchange (BSE) Sensex ended at 3569.58 (down 78.00 points), while the National Stock Exchange (NSE) S&P CNX Nifty 50 closed at 1115.80 (down 24.20 points).

The market breadth was negative as the ratio of advances to declines on the two exchanges taken together stood at 870 : 1681.

Traded volume on the BSE was Rs 1,145 crore while it was more than twice that at Rs 2,890 crore on the NSE.

The capitalisation of the breadth was widely negative with the numbers being Rs 459 crore: Rs 3,571 crore on the two exchanges combined.

The breadth in numerical and capitalisation terms underscores the nervousness in sentiment as players are rushing to pull out of the long positions as aggressively as they were pumping money to get into them.

The outlook for Tuesday's trading session is of extreme caution as the Nifty is precariously poised at it's 30-day simple moving average, which is at 1115 levels.

I have been advocating this support level last week, and should this range not hold, I expect the next support to come at around 1085.

Among stocks, the Gujarat Ambuja Cements counter is a market outperformer and above Rs 214 levels on a continuous basis, remain long in small lots in the cash and options segment.

Tata Engineering is likely to see a slight profit taking now that the numbers are out. Historical support is seen at the 13-day simple moving average, which is poised at Rs 212 levels.

I advocate selling Rs 230 calls in the July series to avail a lower risk premium inflow. Traded volumes must be curtailed in view of higher volatility. Capital preservation must be the topmost priority.

Vijay Bhambwani

CEO, BSPLindia.com

The author is a Mumbai-based investment consultant and invites feedback at vijay@bsplindia.com.

Sebi disclosure: The author has no exposure in any securities mentioned above.