Undercurrent bares weakness

TECHNICALS

The markets opened on a cheerful note and proceeded to trade lower through Thursday. The benchmark indices lost ground marginally. The traded volumes were stagnant, which shows a lack of participation from the retail segment.

The market breadth showed indecisiveness as the ratio of advancing to declining shares on the Bombay Stock Exchange and the National Stock Exchange combined were 1588 : 1577.

Futures & options data from Wednesday's session bare a healthy 2 per cent rise in open interest, which points towards a higher risk appetite among the bulls.

The indices have managed to close below their short-term critical supports at 2064 and 6584 on the Nifty and Sensex, respectively. This points towards a weak undercurrent and a further slide in the coming session is not ruled out.

Downside support exists at 2048 and 6524 levels on the Nifty and the Sensex, respectively, in the coming session.

Resistance on the upside will be seen at 2074 and 6594 levels on an intra-day basis in Friday's session.

Keep a tab on traded volumes, open interest and market breadth for signs of trend determination in the absolute near term.

The outlook for Friday is of abundant caution as the bulls are unable to pull up the markets above the previous highs and are lacking conviction. Being a weekend session, we do not expect significant fresh buying support.

Among stocks, activity is likely to be seen in Bhel, which is showing signs of regaining lost ground on the charts.

Buying is recommended in the cash and derivatives segments with a 2 per cent stop-loss. Expect to see 3-4 per cent upsides in a bullish market in the near to medium term.

Traded volumes need to be curtailed in view of the higher volatility.

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.