Resistance bands to set the tone

Technicals

Wednesday's session ended with losses of 0.64 per cent and 1.13 per cent on the Sensex and Nifty respectively.

The market breadth, though negative, improved compared with Tuesday at 1158 advances to 1516 declines.

The traded volume was higher compared with the 10 day average.

The capitalisation of the breadth was also negative but marginally so compared with Tuesday. That signals a churn among the players as the stronger hands seem to be absorbing stock from the weaker hands.

Sectoral weakness was seen in the software stocks, which are likely to be a drag in the coming two sessions.

Due to the weightage of technology on the indices, the markets may look unduly weaker as resource shift across sectors may take some time.

The Nifty has taken support at 1164 levels, which is the 13-day simple moving average and has further short-term support at 1150 levels and should not breach the range.

Should 1150 levels be violated, I feel the markets may see some panic.

On the upside, I expect resistance to come at 1184 & 1198 levels. These bands will set the tone in the coming few days.

The outlook for Thursday is that of caution though the fall is not likely to be as sharp as the previous two sessions.

Most of the index composite stocks (barring technology) are nearing short term supports and witness a relief rally in the absolute short term.

The pulback though maybe of a short-term nature till 1200 levels are conclusively overcome.

Among stocks, the State Bank of India counter has support at Rs 400-Rs 401 levels, which is the 30-day simple moving average and should be a speculative buy, especially after a 10 per cent fall in the last 5 sessions.

Buying in the cash and derivatives segment is advisable for short term / intra-day perspective.

Traded volumes must be curtailed as speculative calls are fraught with risks.

Gujarat Ambuja Cements is one of the strongest index counters in the short term and has ended the previous session with marginal gains after having taken support at it's 13-day simple moving average.

This stock has higher relative strength compared with the Sensex and the Nifty and should be bought in small lots in the cash and derivatives segment.

Vijay Bhambwani

CEO, BSPLindia.com

The author is a Mumbai-based investment consultant and invites feedback at vijay@bsplindia.com.

Sebi disclosure: The author has no exposure in any securities mentioned above.