| The markets ended the day with sharp losses due to the blasts in Mumbai. The selloff initiated was savage. As I had advocated in the past, selling had commenced before the terror news trickled in. The levels of 1350 have proved to be a formidable resistance range on the NSE Nifty.
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| In my opinion, had the blasts not occurred, the fall would still have happened, though the magnitude would have been gradual. The traded volumes were sharply higher than the 10-day average and the breadth was highly negative. While this was expected, the scenario needs to be watched for a few sessions.
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| The important support levels for the Nifty will be at the 1235 - 1240 and for the Sensex at 3930 levels.
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| It is imperative that the indices not fall below these levels in the next few sessions.
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| A historical analysis of the index movements has shown that in the March 1993 blasts, the markets had bounced back within two trading sessions.
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| Should the overseas markets be firm and all other factors remain the same, the news will be digested within two trading sessions.
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| The undertone remains positive and the main trigger in the immediate future will be the expiry of the derivatives series in August.
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| The outlook for the markets on Tuesday is that of cautiousness as the offloading may continue - albeit with lower volumes. The majority of the panic selling may be already through so a gradual slide may be seen rather than a frenetic selling climax with high volumes.
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| The recent market out-performers which saw heavy volumes with sharp gains will be the first casualties as nervousness replaces greed.
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| It will be a difficult task to take exact calls on the markets but investment will be a safer option rather than short term trading. I expect defensive sectors like pharmaceuticals to be in the limelight.
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| Among stocks, the Ranbaxy counter continues to be on an upturn and gets strong support at Rs 840 levels.
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| Buying should be initiated at all declines by patient investors with a stop-loss at Rs 830 levels. I expect the counter to show 7-10 per cent appreciation in the near term.
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| Reliance is a market out-performer and an index heavyweight. Any rally in the benchmark indices will see a higher appreciation in this scrip.
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| Good support exists at Rs 360 levels, below which the stock is unlikely to go in today’s session. Buy for short term gains in the cash and derivatives segment.
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| Traded volumes must be curtailed in view of the high volatility.
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| Vijay Bhambwani
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| CEO, BSPLindia.com
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| The author is a Mumbai-based investment consultant and invites feedback at vijay@BSPLindia.com.
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| Sebi disclosure: The analyst has no exposure to the scrips mentioned above. |
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