Nifty likely to witness 5875-6500 range this week

The markets witnessed a vicious profit-taking bout as the post-mahurat unwinding caught up with the bulls.

The market breadth turned negative as the combined exchange weekly advance decline ratio was 9,976:12,084. The capitalisation of the same on a commensurate basis was also negative as the figures were Rs44,163 crore: Rs70,519 crore. The turnover on the exchanges rallied nearly 10% on a week-on-week basis, indicating increased unwinding. The NSE lost Rs2,70,709 crore in market capitalisation during the week. In terms of sectoral performance, the banking stocks witnessed the brunt of selling as the erstwhile build up of long positions were unwound, followed by technology and mid-caps.

Overseas investors bought equities worth Rs1,654.7 crore during the week, as the inflows trickled lower as compared to the recent average. The rupee shed weight vis-a-vis the dollar as the closing was at 44.83 levels (against the previous week’s 44.21 levels) on the back of slowdown in inflows.

The US markets witnessed an approx 2 % decline in values as the Nasdaq slipped faster than the Dow Jones index. The UK FTSE did marginally better as the declines were smaller as compared to the US benchmarks. In the Asian region, the Chinese markets led the decline and the Hong Kong market followed suit. The Japanese market managed to log 1% gains and the Singapore market managed to close in the green.

The overseas cues are mixed-to-negative and the domestic markets will have to swim against the tide of nervous undertones in order to rally.

Technically, the 6175 level which I had advocated as a stop on purchases has been breached and therefore, longs would have been stopped out. The weekly range advocated between the 6500/ 5925 held. This week is likely to witness a range of 6500 on advances and 5875 on declines. The wide range is due to the continued high base effect of the previous week’s range. The bullish pivot will be at the 6225 levels and the bearish pivot at the 6150 levels. The immediate threat perception to the bulls will be from margin calls. Tread with caution in the near term. Avoid aggression on the long side, especially in the leveraged segment.