Weak internals indicate retail pullout

After opening on a weak note, the markets ended with deep losses as the bear hammering persisted till the fag end of the session. The benchmark indices lost nearly 2 per cent at close.

The traded volumes were sharply lower as compared to the previous session, which is a routine indicator on a downtick session as retail trader tend to withdraw from the activity. The market breadth was negative as the BSE & NSE combined advance decline ratio was 1,116:2,462. The capitalisation of the breadth was also negative as the sellers overwhelmed the buyers.

The indices have closed in the lower end of the intraday band as the selling pressure persisted till the fag end of the session. The weak internals and lower volumes indicate a retail pullout, which is bad news for the bulls. The bearish charge was led by the banking stocks which witnessed an unwinding bias.

The intraday range specified for Monday between the 2,680 and 2,565 levels has held as the Nifty moved approximately within these parameters. The coming session is likely to witness a range of 2,615 on advances and 2,500 on declines. The bullish pivot for the session will be at the 2,600 mark above which the bulls will prevail over the bears. Alternately, below the 2,575 level, the bears will return with renewed strength.

The market internals indicate a lower turnover due to the weakness. The number of trades were lower and the average ticket size per trade was lower, indicating a weak buying bias. The capitalisation of the market was lower in line with a downtick session.

The outlook for the markets on Wednesday is that of caution as the truncated week ahead due to holidays will see overseas cues assuming higher significance in the near term.

Vijay L Bhambwani 
(CEO - BSPLindia.com)

The author is a Mumbai-based investment consultant)