Bears strike back, profit-taking bias builds

The week witnessed a bout of profit-taking after seven weeks of higher closes. Being the eighth week (8 is a Fibonacci number), I had advised against fresh leveraged longs in last week’s article.

The combined exchange weekly advance-decline ratio was negative as the figures stood at 6724: 11065. The capitalisation of the same on a commensurate basis was also negative as the figures stood at Rs 37,815 crore: Rs 52,596 crore. The NSE lost Rs 1,76,438 crore in market capitalisation on a week-on-week (w-o-w) basis. In terms of sectoral performance, the decline was led by the banking index, followed by the midcap benchmark, whereas the technology index posted minor gains.

The overseas investors were net buyers to the extent of Rs2,838.4 crore and that saw the rupee close at the 48.93 levels. The US headline indices saw the Nasdaq Composite outperform the DJIA.

The UK FTSE 100 witnessed a relative outperformance of US peers as buying was relatively pronounced. In the Asian region, the rally was led by Chinese and Japanese markets whereas the Singapore and Hong Kong markets were drags in the region. The overseas cues have remained optimistic and the domestic markets need ample internal triggers to rally further.

Technically, the domestic markets remain above the bearish channel for the fifth week in a row, even as the weekly candle chart of the Nifty shows a bearish piercing pattern due to the profit-taking bias. The weekly range advocated for the Nifty between 5775 / 5200 levels has held as the benchmark trended within these levels. This week is likely to witness a range of 5500 on the upside, as long as the Nifty stays above the bullish pivot at the 5400 mark. In case of declines, the Nifty is likely to test levels of 5250 as long as the bears keep the Nifty below the 5350 levels. Any move beyond the parameters will call for a re-calibration of the existing move.
lachman.ramchand@gmail.com