Overseas cues, F&O expiry key to market direction

TECHNICALS

The market opened on a negative note on the back of weak overseas cues but rose to buck the trend on short covering. This relentless bear squeeze was along historical lines and was exacerbated by the significant short build up in the last four weeks. Traded volumes spiked and the market breadth was positive as the combined exchange figures were 2176 : 1566.

The capitalisation of the breadth was also positive as the commensurate figures were Rs 10,949 crs : Rs 4,196 crs. The F&O data for Wednesday's session indicated a 1.9 per cent increase in net long positions.

The indices have closed at the upper end of the intraday range on better volumes as the rollover process witnessed covering of hedged positions. The intraday participation too picked up as the crossover into the positive territory saw hectic participation from day traders.

The market breadth being positive and better volumes add to the picture of optimism for now. The 4330 Fibonacci level was overcome on a closing basis and the 4350 resistance was overcome. The coming session is likely to witness a range of 4445 on advances and 4270 on declines. The intraday range appears wide due to the big intraday base of Wednesday.

The outlook for the market on Thursday is likely to be that of guarded optimism as the overseas cues cum F&O expiry exert their pull and push pressures on the near term outlook. Aggressive trades must still be avoided.

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.