Selling pressure on the cards

TECHNICALS

The markets opened on a weak note and ended Tuesday at almost the same levels after a see-saw session laced with nervousness.

Traded volumes improved marginally but sentiment was brittle. The market breadth "" measured by the ratio of advancing stocks to declining stocks "" was negative as the figures on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) combined stood at 711 : 1855.

The capitalisation of the breadth was also negative as the figures on the two bourses combined were Rs 3,564 crore : Rs 4,534 crore.

Derivatives data available for Monday's session show a marginal rise in open interest as the Nifty has seen short-covering at lower levels.

The indices have lost even more ground on an intra-day basis and the supports at 5550 and 1750 levels have been violated.

As per technical analysis, broken supports are next resistance levels and therefore the indices are likely to witness selling pressure at these levels.

Should these levels be surpassed in the near term, expect the Nifty to see levels of 1777 and the Sensex to witness selling triggers at the 5580 levels in the absolute near term.

The undertone remains weak and should the intra-day lows of Tuesday's session be violated, expect the next support at the 1718 and 5385 levels.

There could be selling pressure on Wednesday at higher levels and the possibility of a small corrective rally thereafter.

Should the US markets also bounce back overnight, there maybe bear covering at lower levels and the downsides of the markets being capped in the near term.

The most prudent strategy in the current market scenario would be to sell Nifty calls at deeply out of money strike prices. Positions should be kept to a minimum.

Vijay L Bhambwani is CEO, BSPLindia.com

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

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