Book Profit On Long Positions

The markets opened on an optimistic note on Monday but ended marginally lower.

The Bombay Stock Exchange (BSE) sensex ended at 3,277.27 (down 6.39 points), while the National Stock Exchange (NSE) S&P CNX Nifty closed at 1,058.85 (down 4.55 points).

The breadth was negative as the advances to -declines ratio on the two exchanges combined was at 905:1167.

The traded volume on the BSE was at Rs 1,198 crore, while it was at Rs 2,473 crore on the NSE.

The capitalisation of the breadth was also negative as advances were valued at Rs 1,141 crore, while declines were higher at Rs 2,515 crore on the BSE and NSE taken together.

The indices are now precariously poised at their short-term averages and any further fall, with higher volumes, pointing towards extreme cautiousness.

The trading pattern shows a sense of despondency as the index heavyweights saw a selling spree in the final hour of the day.

The time value of holding long positions will start eroding in profitability terms if prices do not start rallying soon.

The Nifty faces short-term resistance at the 1,076 levels, and unless it closes above this level, no fresh upward movement should be expected.

The corresponding level on the sensex would be 3,328. On the lower side, short-term support can be expected at 1,040 and 3,245, respectively.

Players are expected to take a cautious approach on Tuesday as markets are nervous and any adverse movement on the overseas exchanges will exacerbate the local weakness.

Long positions must be held carefully. Book profits wherever available on any long positions.

Stock-specific activity may be seen in Mahanagar Telephone Nigam Ltd (MTNL), NIIT, Bharat Heavy Electricals and Infosys Technologies on the downside. Buy put options on these counters, especially in MTNL, which has now turned extremely weak.

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.