Domestic markets in pullback mode

The markets witnessed a pullback in the latter part of the week, and that saw the headline indices close in the green on a week-on-week basis.

The undertone remained cautious and retail participation dipped marginally due to the volatility. The expiry of the May F&O series added to the froth. The weekly combined exchange market breadth was positive as the figures were 11415:9373. The capitalisation of the same on a commensurate basis was Rs 51,739 crore:Rs 33,763 crore. The traded volumes dipped on a week-on-week basis. The Nifty gained Rs 1,02,948 crore in market capitalisation over the previous week. In terms of sectoral performance, technology and banking stocks led the upthrust even as the mid-cap segment brought up the rear.

Overseas investors sold equities worth Rs 2,313.8 crore during the week (data for May 26 was not available), the rupee closed at the 46.35 levels to the dollar (against the previous week’s 46.92 levels). The US markets saw the Nasdaq Composite Index outperforming the Dow Jones Industrial Average and Britain’s FTSE Index outperformed the US indices.

That explains the strength in the domestic technology stocks during the week gone by. The Asian region saw the Nikkei 225 Index lose ground even as the Shanghai, Hong Kong and Singapore indices pulled back in varying percentages after steep declines took these benchmarks in oversold territory in the recent weeks.

Technically, the domestic markets are in pullback mode and the upthrust is indicating a lack of buying conviction on advances as the put-call ratios are tilting in favour of shorts on every 1% upthrust.

The weekly range advocated for the Nifty last week between the 5100/ 4675 levels has held as the index trended within these parameters. This week is likely to witness a range of 5250 on advances, support is likely at the 4875 levels, below which 4650 may be tested if the undertone turns blatantly bearish.

The bullish pivot will be at 4975 and the bearish pivot at the 4900 levels. Traders must watch these levels for crossovers this week for indications of short-term trend determination.