Comment

The markets witnessed a down trending week as bears prevailed over the bulls with ease.

The benchmark indices plunged to a calendar-year low and the lowest weekly close after the week ended December 24, 2009. That is a sign of unwinding that may provide overhead supply in the near term.

The market breadth was negative as the combined exchange advance-decline ratio for the week was at 7341:13882. The capitalisation of the same was also negative as the commensurate figures were Rs 34,778 crore:Rs 82,329 crore.

The Nifty lost Rs 2,01,573 crore in market capitalisation on a week-on-week basis. The technology and mid-cap indices lost more than the broader markets even as the banking index trailed behind.

Overseas investors withdrew Rs 758.70 crore as the markets nosedived. That had an adverse impact on the rupee, which closed at the 46.16 levels vis-a-vis the dollar, against the previous week’s 45.78/$ level).

The US and the UK headline indices lost between 4-5% as buying support evaporated at higher levels. In the Asian continent, the Straits Times Index (Singapore), the Hang Seng (Hong Kong) and the Nikkei (Tokyo) lost identical ground and closed below their 13-week moving average, which is a bearish indicator.

As advocated last week, this week too is likely to have a sobering effect on domestic markets as far as overseas cues are concerned.

Technically, the indices have shown indications of the uptrend fracturing as the headline indices have fallen from the double top formation and closed below their 13-week moving average.

Should a sustained trade below the previous week’s lows be seen, expect the bears to retain their initiative in the near term. Upthrusts are likely to be temporary pullbacks as long as the Nifty trades below the 5175 levels with higher volumes and open interest expansion. Conversely, as long as the Nifty remains below the 5090 pivot, the outlook will be bearish.

The weekly range advocated last week between the 5325/ 5075 levels was violated on the downside. This week is likely to witness a range of 4750 on declines and 5250 on advances. I maintain my view that traders must emphasise on capital preservation in the near term