Weakness ahead as bears take charge

TECHNICALS

The markets have closed at the lower end of the intraday range as the bears took charge of sentiment. That the market internals were negative is a sign of continued weakness in the underlying sentiment.

The 4710 / 4545 range advocated for Monday was violated downward as the index closed convincingly below that threshold. The coming session is likely to witness a range of 4635 on advances and 4370 on declines.

The wide range is due to the big base effect of Monday's intraday range. The 4500 level will be a bearish threshold, below which the bears will continue to dominate the sentiments.

On the flip side, a sustained trade above the 4545 levels will see some short-covering. If the Nifty remains entrenched in a falling channel, it will have negative implications.

The market internals indicate a higher turnover as the participation levels rose. 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 downtick session.

The outlook for the markets on Tuesday is that of caution as the bears are likely to book profits on declines and cushion the falls marginally. Avoid big ticket trades 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/s recommended above.