Outlook guarded on unconvincing upthrust today

TECHNICALS

The markets opened with a gap up and proceeded to trade higher in tandem with the strong overseas cues. The 4250 congestion hurdle was convincingly overcome as the Nifty closed above this threshold.

The market breadth was positive as the BSE & NSE combined advance decline ratio was 3059 : 743. The capitalisation of the breadth was also positive as the commensurate combined exchange figures were Rs 10932 crs : Rs 1605 crs. The F&O data for Friday's session indicated a routine unwinding ahead of the August F&O series expiry.

The indices have closed at the upper end of the intraday range albeit with lower traded volumes. The market breadth was positive and the rally can be largely attributed to the pre-expiry short covering historical precedence. The 4245 resistance level specified for Monday was convincingly overcome as the closing was above this threshold.

The coming session is likely to encounter resistance at the 4330 - 4335 as the first upward point of resistance and 4375 as the exhaustion point of any further upmove.

The declines will see support at the 4230 levels and any sustained trade below this level will be a negative portend for the near term outlook. Watch the declines and note the traded volumes on downsides as higher volumes may indicate distribution.

The outlook for the markets on Tuesday is likely to be guarded as the upthrust was on unconvincing volumes and needs to be watched rather than traded aggressively.

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 the scrips mentioned above.