Technology stocks to drag down indices

TECHNICALS

The markets started trading on a firm wicket and ended the day with almost 3 per cent loss after a panic-stricken session. The traded volumes were steady compared with the previous session and in line with 10-day average.

The market breadth was highly negative as the Bombay Stock Exchange and National Stock Exchange combined figures were 550 : 2077.

The capitalisation of the breadth was also highly negative as the combined exchange figures were Rs 406 crore : Rs 7445 crore.

The derivatives figures available for Friday's session show a marginal rise in outstanding long positions. That is a sign of concern as there is a lack of conviction by bulls at higher levels.

The Indices have closed below their support levels and near the intra-day lows as the sentiments have been distinctly hit and the undertone is now outright bearish.

The upsides are likely to be exit points and the bulls are likely to surrender their long positions out of sheer panic.

The immediate support for the markets will be at 5466 and 1720 levels on the Sensex and Nifty, respectively. The upsides will be capped to the 1784 and the 5566 levels on the Nifty and Sensex, respectively.

The technology sector and select index heavy-weights are likely to cause a further attrition in the markets. Continue to watch the price / volumes / market breadth combination for signs of a trend determination signal.

The outlook for the markets on Tuesday is that of abundant caution as bulls are clearly on the defensive and technology is likely to be a drag on benchmark indices.

Being heavily weighted in indices, this sector will hold the key to the near term outlook for markets. Other stocks that need to be watched for market moods are Hind Lever, ITC, Reliance and Tata Steel.

I continue to advocate selling Nifty straddles at conservative strike prices and in minimal lots only.

Vijay L. Bhambwani is CEO, BSPLindia.com.

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

SEBI disclosure: the author has no outstanding positions in any of the stocks mentioned above.