Margin calls still around the bend

TECHNICALS

The markets opened on a weak note and collapsed early in the day. The latter half of the session saw bears with daggers drawn as the falls were exacerbated with intraday selling.

The benchmark indices lost over 3 per cent as bulls were unable to stem the selling tide. Traded volumes were higher than the previous session as the intraday traders participated in the mayhem.

The market breadth was highly negative as the BSE and NSE combined figures were 685 : 2814 and the capitalisation of the breadth was also negative as the figures on a BSE & NSE combined basis were Rs 1366 cr : Rs 12961 cr.

The indices have closed at the lower end of the intraday range, the volumes have been higher and the breadth extremely negative. These are indicators of weakness as the bulls have surrendered their initiative to the bears.

As I had mentioned recently, the indices are exhibiting a "long pole" formation on the intraday charts as the steep fall resembles as pole due to the vertical fall of nearly 3 per cent.

While the 3913 support advocated for Monday's session did not hold, the bearish pressure was significant and seems to be placing the extremely short-term oscillators in the near oversold zone. That indicates a short pullback rally, though the same can terminate without a warning and therefore maybe very treacherous.

The coming session is likely to witness intraday levels of 3913 on advances and 3777 on declines. Traders may please note that the 3777 level is a very crucial retracement support. A close below this level with high volumes and shedding of open interest may witness some more panic sales.

The outlook for the markets on Tuesday is that of caution as the upsides are likely to be capped and the selling pressure on advances, especially as the Nifty spot nears the 3888 mark is likely to be significant. Barring a corrective bounce, expect the Nifty to remain under pressure for the absolute short term as margin calls and forced selling may still be around the corner.

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.

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