Impending F&O expiry to set the tone

TECHNICALS

The market breadth was negataive as the NSE advance-decline ratio was 366 : 896. The capitalisation of the breadth was also negataive as the impeding expiry of the May F&O series witnessed bull unwinding.

The indices have closed at the lower end of the intraday range as the bulls remained on the ropes.

Since the current derivatives settlement had witnessed significant bullish build up, the impeding expiry witnesses unwinding of these longs, resulting in a negative spiral. As advocated yesterday, the index range was pointing downwards as the lower bottom and tops formation indicated a stiff overhead supply.

The intraday range advocated for Tuesday at the 4935 / 4815 levels has held as the Nifty traded within these parameters. The coming session is likely to witness a range of 4800 on declines and 4915 on advances.

The 4880 level will be the bearish pivot below which the markets are likely to remain soft.The outlook for the markets is that of Wednesday is that of abundant caution as the expiry related consideration will dominate the near term sentiments rather than an efficient price discovery mechanism. Capital preservation should be the top priority.

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 the scrips recommended above.