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ShareThe week was a negative one for the markets as participants chose to unwind after the much-anticipated Budget. The 4450 hurdle proved to be an inviolate obstacle and the bears emerged with daggers drawn. The weekly market breadth on a combined exchange basis was 5673:13240.
The capitalisation of the same was also negative as the commensurate figures were Rs 31,890 crore:Rs 83,301 crore. The erosion was led by banking and midcap sectors as bull-unwinding was significant in these segments. The banking sector slipped as sell-off was exacerbated in the financials on account of fears of higher deficit in the Budget. Since the markets were top heavy before the Budget, the sell-off was more pronounced as exhausted bulls surrendered longs, pressurised by margin calls and stop loss compulsions.
The overseas cues were negative as the US indices lost close to 2% on a week-on-week basis and the UK FTSE 100 lost almost 2.5%. The FII inflows were positive by Rs 2931.10 crore during the week, but the rupee fell to 49.01, thereby unnerving the overseas investors. If the rupee continues to weaken, FII inflows may slow down or reverse in the absolute near term. Since the technology-laden Nasdaq Composite has weakened in tandem with the old economy Dow Jones Industrial Average, the domestic technology stocks, too may have a limited upside potential if fresh weakness occurs in these overseas indices.
Technically, the indices have witnessed a head and shoulder top formation as the headline indices have closed below the opening levels of May 18, 2009, thereby putting the bulls at a distinct disadvantage. Since almost all the fresh longs were on or after May 19, 2009,at or above the 4400 levels on the Nifty and cost of carry have been incurred, the margin calls and technical stop loss triggers may induce fresh weakness. The weekly range advocated for the Nifty between 4575/ 4150 was violated on the downsides as the Nifty closed near the 4000 levels.
This week is likely to witness a range of 3675 on declines and 4350 on advances on the Nifty spot. The bullish trigger for the week will be at the 4280 level and the bearish pivot at the 4160 levels. The levels on the BSE Sensex will be at the 14575 on advances and 12400 on declines.
I would recommend buying only after the momentum turns positive, even at the expense of losing some portion of the upthrust.
lachman.ramchand@gmail.com
