Volatility to stay higher on quest for equilibrium

TECHNICALS

The markets opened on a bullish note and proceeded to trade higher through the day. The benchmark indices gained almost 2 per cent at close. Traded volumes were lower than the previous session as the buying conviction was lacking on advances.

The market breadth was marginally negative as the BSE and NSE combined figures were 1515 : 1811 and the F&O data for the previous session indicated a 5 per cent fall in net positions due to price depreciation and short covering.

The indices have closed at the higher end of the intraday range as the bear covering was seen keeping up till the fag end of the session. An unconvincing market breadth and low traded volumes indicate a lack of buying conviction.

The 3682 resistance held as the Nifty fell from the 3679 level itself, validating the combination of signals generated by point and figure and Elliot charts.

The coming session will witness an intraday range of 3719 on advances and 3591 on declines. Traders need to monitor the average traded price (ATP) of the indices on a day-on-day basis, preferably on the 60 minute charts to gauge the commitment of bullish traders.

Unless the midcap index rallies along with the front-line benchmarks, the rally will not be unsustainable "� the midcap index comprises of a majority of non-F&O stocks and therefore is a true barometer of risk appetite.

The outlook for the markets on Wednesday is that of continued higher volatility as the markets attempt to find their equilibrium levels in the near term.

Savvy and disciplined players need to play it cool and wait in the wings to enter afresh at the appropriate time to achieve superlative returns on high relative strength cum low beta scrips. Make a deliberate attempt to keep the beta factor low on your portfolio and open leveraged trades.

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.