Lower capitalisation sign of bearish mood

TECHNICALS

The first day of the week marked a weak session as the overseas cues weighed down domestic sentiments. The indices breached the July 16, 2008, lows, which highlights the underlying weakness.

The market breadth was negative as the BSE & NSE combined figures were 457 : 3437. The capitalisation of the figures on a commensurate basis was also negative as the bulls had no where to run.

The turnover was higher due to the unwinding bias and players rushing for the exit door. The indices have closed at the lower end of the intraday range and that too on negative market internals.

The intraday range advocated for Monday at the 3880 / 4050 levels was violated on the downsides as the Nifty closed below this threshold by a significant margin. The coming session is likely to witness a range of 3980 on advances and 3715 on declines. As long as the Nifty remains below the 3860 levels, the bears will continue to have an upper hand in the markets.

The market internals indicate a higher turnover as the participation levels rose due to the unwinding. The number of trades increased 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 Tuesday is that of declines and bargain buying must be avoided. Continue to preserve capital in the near term.

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.