Undercurrent of cautious optimism

TECHNICALS

The bourses kicked off Wednesday on an optimistic note but the bulls only flattered to deceive as the closing was absolutely flat.

Traded volumes were steady at Rs 2,333 crore and Rs 5,539 crore, respectively, on the BSE and the NSE.

The breadth was positive as the ratio of advances to declines on the two exchanges combined stood at 1318: 1191.

The capitalisation of the breadth was also positive as the figures on the two bourses taken together stood at Rs 5,621 crore : Rs 2,243 crore.

Derivatives data available for the previous session show a fall in futures open interest even as outstanding long positions are being beefed up in the options segment.

The indices have closed at threshold levels yet again as the bearish sloping channel tops have provided ample support at the 1804 and 5660 levels on the Nifty and Sensex, respectively.

The mandate will be clearly bullish only after the Nifty closes above 1836 levels with higher volumes and positive breadth, along with rising open interest.

Till then, expect 1790-1800 levels to be the support floor for the Nifty and 5660 for the Sensex. The resistance on the upsides wll be at the 1845 and 5760.

The outlook for Thursday is of cautious optimism as the majority of contracts are already rolled over or squared up ahead of expiry and the transition to the next month's series is likely to be seamless.

The markets are likely to attempt an upmove and the rally will be aided by short covering at higher levels. Volatility is likely to be higher and volumes may dip on the last day of the settlement.

I continue to advocate Nifty bear call spreads as the outlook appears rangebound for now.

Traded volumes need to be curtailed in view of the higher volatility.

Vijay L Bhambwani
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.