Keep away from short-selling for now

TECHNICALS

The oversold markets reacted to overseas cues as the week began with a mild bear squeeze. The traded volumes contracted and the market breadth was negative as the combined exchange figures were 1364 : 2423.

The capitalisation of the breadth was positive as the commensurate figures were Rs 8920 Crs : Rs 4584 Crs. This divergence indicates a selling on small- and mid-cap stocks and focused buying on select index heavyweights.

The indices have closed in the upper half of the intraday range and that too on weak market internals. The traded volumes were insipid for a Monday, which raises questions on the sustainability of the upmove, if follow-up buying is not forthcoming.

The intraday range specified for Monday at the 3,250-2,885 has held as the Nifty respected the resistance specified. The coming session is likely to witness a range of 3,235 on advances and 3,000 on declines. The market internals indicate a lower turnover as the participation levels fell marginally due to the sudden strength.

The number of trades decreased and the average ticket size was lower, indicating a poor buying bias. The outlook for the markets on Tuesday is that of cautious optimism as the overseas cues need to be positive and follow-up buying must emerge to keep the buoyancy alive. Avoid short-selling 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.