Nifty seen moving in 4675-5100 band

Last week witnessed weakness and volatility spike as overseas cues spooked the bulls into a corner.

The weekly Bombay Stock Exchange and National Stock Exchange combined advance-to-decline ratio was negative as the figures were 7362:13394.

The capitalisation of the same on a commensurate basis was also negative as the figures were Rs 39,324 crore : Rs 50,507 crore.

The Nifty lost Rs 1,65,328 crore in market capitalisation as the headline indices plunged. In terms of sectoral outlook, technology and banking stocks led the rout as the unwinding was seen in sizable numbers on these counters.

Overseas investors pulled out Rs 3,655 crore last week and that had a dampening effect on the Indian rupee, which ended the week at 46.92 levels vis-a-vis the US dollar (previous week 45.21 levels).

Overseas markets were roiled by the euro zone imbroglio and the fag end of the week saw short covering push indices mildly higher.

The US indices witnessed a sell-off that tested the fortnightly lows (which were also calendar year lows). The Nasdaq saw higher relative weakness as compared to the DJIA, indicating weakness in the domestic technology stocks.

The FTSE 100 saw greater relative weakness as compared to the US markets as the benchmark made a new calendar-year low. In the Asian region, the Japanese and Singapore markets led the sell-off even as the Chinese markets brought up the rear.

Technically, the domestic markets are likely to witness a pullback action in the initial part of trade and profit sales on advances as the expiry of the May F&O series witnesses a routine pre-expiry bear squeeze.

The weekly range of 4900-5200 advocated for the Nifty was violated on the downsides as the Nifty plumbed lower than the specified support.

This week is likely to witness a range of 5100 on advances and 4675 on declines. The bullish pivot for the markets will be at the 5000 levels and the bearish pivot at the 4950 levels.

I maintain my view that the markets are on treading on thin ice and big ticket purchases are ruled out in the leveraged segment for now. Delivery buying from a long-term perspective may be initiated.