Focus on capital protection; cut exposure on fresh trades

Last week witnessed a bearish outcome as the bulls failed to hold the fort towards the end of the week. The combined exchange weekly advance decline ratio was positive as the figures stood at 12,168: 9,318. The capitalisation of the same on a commensurate basis was also positive as the figures stood at Rs45,401 crore: Rs31,221 crore. The NSE gained Rs36,489 crore in market capitalisation on a week-on-week basis. In terms of sectoral performance, the CNX IT was the weakest link in the sectoral chain, whereas the banking and midcap indices were net gainers.

The overseas investors were net buyers to the extent of Rs1,184 crore and that saw the rupee close at the Rs46.55 levels vis-a-vis the US dollar (previous week 45.78 levels). The US headline indices saw the DJIA under perform the new economy Nasdaq Composite as the old economy stocks benchmark fell harder due to the euro zone worries. The UK FTSE 100 witnessed a decline in tandem with the US headline indices. In the Asian region, the fall was led by the Japanese, Hong Kong, Chinese and Singapore markets in that order. The overseas cues are negative and the domestic markets will require ample internal triggers to rally in the face of global weakness.

Technically, the domestic markets have seen a bullish weekly close which has ended above the 5000 psychological benchmark. Barring the last trading day of the week, the trading pattern displayed optimism. The weekly range advocated for the Nifty between the 5300 and 4600 levels have held as the benchmark trended within these levels. This week is likely to witness a range of 5300 on the upside as long as the Nifty stays above the bullish pivot at the 5100 mark. In case of declines, the Nifty is likely to test a level of 4800 as long as the bears keep the Nifty below the 5025 levels. For Nifty traders, the first two sessions of this week are critical as the markets will need to discount the overseas weakness and determine the course of action thereafter. Capital protection should be a trader’s priority.

Cut back exposure on fresh trades if any.