Nifty seen moving in 4600-5150 range

Last week witnessed a nervous undertone as external factors exerted a downward pressure on sentiments. The weekly combined exchange advance-decline ratio stood at 8270:11957 and the capitalisation of the same on a commensurate basis stood at Rs 26,048 crore : Rs 76,592 crore. The NSE lost Rs 98,790 crore in market capitalisation on a week-on-week basis. Technology stocks were the laggards during the week and midcap scrips brought up the rear.

FII investments during the week worked out to a net inflow of Rs 605.90 crore, which is a trickle compared with the previous week. The rupee stabilised as a consequence to settle at the 46.64 level vis-a-vis the US dollar. The overseas indices were under pressure as profit sales towards the end of the week eroded initial gains. The losses were marginal in the US and UK benchmarks, whereas the Hong Kong and Tokyo markets were roiled by profit sales. The outlook for the near term has turned cautious.

Technically, the domestic markets have violated an upward sloping trend line and closed lower. These are signs of bulls being on the ropes and will need concerted buying activity to return with strength. The triggers need to be highly positive to bring the bulls back in action and the Nifty will need to trade above the 5100 level consistently to bring back optimism. The weekly range advocated last week between 5175 and 4840 has held more or less as the lower level was pierced by a small margin.

This week is likely to see 5150 on advances, above which, the likely level would be 5350. On declines, support is likely at the 4600. The bullish pivot will be at the 5025 and the bearish pivot at 4935. Traders need to watch these thresholds for resistance or support, respectively.

I continue to advocate an emphasis on capital preservation as the volatility in the markets is likely to remain higher than what a retail trader can handle.