Market dice still loaded against bulls

Last week saw mayhem in the markets as overseas troubles percolated down to the domestic markets.

The headline indices fell 5% on a week-on-week basis on higher volumes, which a cause for concern. The sectoral picture shows banking stocks taking the brunt of the selling pressure as the crisis was seen as impacting the financials the most.

The combined exchange weekly advance-decline ratio was negative as the figures were 6917:14087. The capitalisation of the breadth on a commensurate basis was also negative as the figures were Rs38,594 crore:Rs51,731 crore. The NSE lost Rs2,62,764 crore in market capitalisation on a week-on-week basis.

Foreign institutional investors (FIIs) were net sellers to the extent of Rs1,520.80 crore (Thursday data not available from Sebi) and that saw the rupee weaken to 45.49 levels versus the dollar, vis-a-vis 44.37/$ in the previous week.

Overseas markets saw a steep decline as US markets plummeted on European concerns. The DJIA closed at it’s lowest after the week ended February 26, thereby erasing eight weeks of gains (closing basis only) in a single week.

The Nasdaq Composite Index fell harder, implying weakness in the domestic technology stocks, which will be partially cushioned by the weak rupee.

The overseas cues are indicating a worrying scenario for
the bulls as the medium term charts indicate a “fracture” in the bullish formations of the recent weeks.

In the Asian region, the Nikkei 225 saw a sell-off of a magnitude higher than the Hong Kong and Singapore peers, but the Chinese benchmark — the Shanghai Composite Index — indicated the highest weakness and will be the cause for greatest concern in the region.

Technically, the domestic markets have seen similar weakness in the benchmarks, though declines have been muted compared to the overseas markets.

The weekly range advocated for our markets between the 5430/ 5100 on the Nifty spot was violated on the downsides as the Nifty violated the psychological 5000 mark on an intra-day basis.

This week is likely to witness a range of 5200 on advances and the 4825 levels on declines. Should the 4825 be violated forcefully, Nifty may test the 4550 levels. The bullish pivot for the week will be at the 5175 levels and the bearish pivot at the 5100 levels. I re-affirm my previous week’s view — the dice is currently loaded against the bulls and therefore, big ticket bottom fishing and bargain hunting is ruled out for the near term in the leveraged segment.