Selloff spillover is probable

TECHNICALS

The markets opened on a cautious note and proceeded to trade lower through the day yesterday.

The benchmark indices lost approximately 2 per cent as selling pressure at higher levels negated the feel-good factor of the bulls. The traded volumes were also substantially high.

The market breadth was negative as the advances to declines figures on the Bombay Stock Exchange and the National Stock Exchange combined stood at 773 : 1975.

The capitalisation of the breadth was also negative as the figures on the two exchanges combined stood at Rs 2,021 crore: Rs 8,460 crore.

Derivatives data available for Tuesday's session show a marginal increase in the outstanding long positions and a major switchover of the near month positions to mid-month contracts.

The indices have been unsuccessful in surpassing the short-term moving averages and these levels will now become the short-term tops at the 1925 and 5965 for the Nifty and Sensex, respectively.

On the lower side, expect the short-term double bottoms at 1844 and 5790 to be the effective near-term supports. The markets are likely to see some more weakness as the indices are showing weakness on the short term charts.

The outlook for Thursday is that of abundant caution as the initial part of the session is likely to see a spillover of the selling pressure from the previous session.

There is a likelihood of a higher volatility as the markets are in a state of flux. Watch the double bottom levels specified above as short-term trend determinants.

Trades must be initiated on thin volumes as I expect higher volatility.

Vijay L Bhambwani, CEO, BSPLindia.com, 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.