High turnover indicates weakness

TECHNICALS

The markets reversed after an uptick in the previous session as the bulls were conspicuous by their absence even at lower levels. The decline was led by sectors which had seen upthrusts recently – banks and midcaps. The market breadth was negative as the BSE & NSE combined figures were 889 : 2921. The capitalisation of the figures on a commensurate basis was also negative as the buying was scattered and mainly by limited short covering.

The indices have closed at the lower end of the intraday range and on negative market internals. That indicates capitulation in the undertone. The oriental chart has displayed a “tsutsumi” pattern which has short-term bearish implications. The coming session is likely to witness a range of 3920 / 3715 on advances and declines respectively. If the Nifty remains above the 3900 levels, the bulls will stage a mild recovery.

Conversely, a consistent trade below the 3865 will have bearish implications. The market internals indicate a higher turnover as the participation levels rose due to the weakness. The number of trades decreased and the average ticket size was higher, indicating a higher selling bias. The capitalisation of the market was lower in line with a bearish session.

The outlook for the markets for Monday is that of caution as the outlook is likely to be determined by the US triggers. Avoid big ticket trades as the emphasis should be on capital preservation for now.

Vijay L. Bhambwani 
(CEO – BSPLindia.com)

The author is a Mumbai-based investment consultant and invites feedback at vijay@BSPLindia.com

Mandatory disclosure – the analyst has no exposure to any scrip recommended above.