Profit-taking bias is likely to extend into this week

Last week saw the bulls on the backfoot as the profit-taking bias extended for the fourth week in a row. The weekly bar chart of the Nifty showed a lower low for the third consecutive week.

The BSE and NSE combined exchange market breadth was negative as the figures were 9,146:12,716. The capitalisation of the same on a commensurate basis was also negative at Rs45,036 crore:Rs72,911 crore. The NSE lost Rs92,057 crore in market capitalisation on a week-on-week basis.

In terms of sectoral performance, the technology sector led the decline, followed by the mid-cap and banking sectors.
Overseas investors were seen cautious as the inflows eased to Rs1,376.9 crore and the FII daily figure was negative for Thursday, October 28, for the first time after August 27.

The rupee closed at the 44.42 levels against the dollar (against the previous week’s 44.48 levels) and that exerted pressure on the technology sector.

The US markets witnessed relative outperformance by the Nasdaq Composite even as the Dow Jones index closed with mild losses. The UK FTSE 100 also eased off marginally in tandem with the Dow. In the Asian region, the Shanghai index closed with mild gains, whereas the Nikkei, Hang Seng and Strait Times indices fell, in that order, on a week-on-week basis. Overseas cues are negative and this week is likely to be underlined with caution.

Technically, the domestic markets appear under pressure as the Nifty fell for the fourth week in a row. The profit-taking bias is likely to extend into this week as the system-based stop losses get triggered, compounded by margin calls in case markets ease lower even marginally on Monday.

The weekly range advocated last week — between 6225 and 5850 has held, as the Nifty trended within these parameters.

This week is likely to witness a range of 6275 on advances and 5800 on declines. The bullish pivot for the week is likely at the 6070 levels and the bearish threshold at the 6020 levels.

I continue to advocate caution for traders, especially on leveraged longs, which must be avoided if possible. The week is likely to be news driven as lots of data points will emanate on the economic front and impact sentiments.

Trade light in the near term.