Bulls likely to go on the defensive

TECHNICALS

The markets opened on a bullish note and proceeded to trade lower through the day. The benchmark indices lost marginally on account of profit sales at higher levels.

The market breadth was highly negative as the BSE and NSE combined figures were 861 : 2495 and the capitalisation of the breadth was also negative as the figures on a BSE & NSE combined basis were Rs 4512 crore : Rs 14907 crore. The F&O data for the previous session signals an optimistic outlook as the open interest rose in significant quantum.

The indices have ended off their intra-day highs and near the lows, which indicates a brittle undertone coupled with a lack of buying conviction at higher levels.

The fact that the traded volumes were lower indicates an absence of panic sales and large scale unloading. The intra-day resistance is likely to be felt at the 2998 levels on the Nifty spot on Tuesday.

Should this top be surpassed, expect significant selling at the 3012 levels which is the channel top on the weekly log chart of the Nifty.

The outlook for the markets on Tuesday is that of abundant caution as the bulls are showing signs of going on the defensive and unless they absorb the selling by short-term traders and the bears, the upsides may not sustain in the absolute short term.

While the medium / long term outlook remains positive, I would advocate caution on all short"�term trades on the long side.

Stock specific activity maybe seen on Ranbaxy which will outperform the broader markets especially if the scrip trades above the 400 levels on a consistent basis. I advocate buying in small lots in the cash and derivatives segment for the short to medium term perspective.

Vijay L. Bhambwani
(CEO- BSPLindia.com)

The author is a Mumbai based investment consultant and invites feedback at vijay@BSPLindia.com  or ( 022 ) 23438482 / 23400345.

SEBI disclosure: the analyst has no exposure to the scrips mentioned above.