The markets opened weak on Friday and ended on a firm foot on the last day of the month and more importantly over the weekend.
The Bombay Stock Exchange (BSE) sensex ended the day at 3,250.38 points (up 30.50 ), while the National Stock Exchange (NSE) ended the day at 1,041.85 (up 07.25).
The market breadth was negative as the combined figures on both the exchanges were 897:1309. Also, the traded volume on the BSE was at Rs 1,368 crore, while on the NSE it was at Rs 3,027 crore.
The capitalisation of the market breadth was positive as the numbers were Rs 2,993 crore:Rs 1,390 crore on a combined exchange computation.
The divergence in the breadth in numerical and capitalisation terms shows that the buying activity was concentrated around a few large cap index heavyweights.
The traded volumes were slightly lower than the 10-day average volumes which makes this up-move a corrective bounce-back.
The indices have taken support at their 200-day simple moving average which is a crucial support zone for the indices.
The rally in the indices was seen in spite of the weak US markets which shows a relative strength in the domestic markets.
The support was seen coming from counters which were heavily oversold on short-term momentum charts. The probability of a technical bounce-back is, therefore, heightened.
The indices will continue to take support at the 1,030 and 3,200 levels on the Nifty and the sensex in the coming 2-3 sessions. On the upsides, expect resistance at the 1,062 and 3,320 levels as higher levels are witnessing distribution.
The outlook for the trading session on Monday is that of caution as the markets are awaiting crucial decisions on the Gulf war front.
Stock specific activity will continue to be seen on Reliance Industries, Mahanagar Telephone Nigam Ltd (MTNL), Ranbaxy Laboratories, Digital GlobalSoft and Tata Steel.
Investors with a short term perspective may build small positions on Reliance as short covering is likely on this counter.
Derivative traders may contemplate buying put options on MTNL in the near month at higher strikes on advances as the counter is overbought and likely to see a correction.
Infosys may see a rally above 4,350 levels and will close a downward gap left during the fall. Buy call options at out on money strikes in the near month.
Vijay Bhambwani
(CEO - BSPLindia.com)
The author is a Mumbai-based investment consultant and invites feedback at vijay@bsplindia.com
Sebi disclosure :- the author has no exposure in any securities mentioned above
