Sensex Technicals and Views

The markets opened on a shaky wicket and proceeded to trade lower through the day.   Benchmark indices shed the highest weight since May 17 2004 and the fall was so fierce that the indices closed at the lower end of the intraday band.   Traded volumes were higher than the 10-day average but lower than the pervious session.   The market breadth was highly negative as the Bombay Stock Exchange and National Stock Exchange combined figures were 91 : 3347 and the capitalisation of the breadth was also negative as the figure on a BSE-NSE combined basis was Rs 767 crore : Rs 11411 crore.   The F&O figures have been confirming the weak undertone as stock futures shed value.   The indices have retraced lower but are still above their channel bottoms. The momentum oscillators are pointing towards a weakness as oscillators are in a sell mode.   The upsides are likely to meet with selling resistance from short-term bulls at higher levels.   Upsides are likely to meet selling pressure at 2518 and 8304 on the Nifty and Sensex respectively.   Support at the lower end will be seen at 2432 and 8118 on the Nifty and Sensex respectively.   Traded volumes suggest a distribution pattern as smart money seems to have offloaded positions.   The outlook for Friday is that of absolute caution as the bulls are likely to be on the backfoot.   Offloading at higher levels combined with weekend factor will see a limited buying.   Traders are advocated to sell deeply out of money puts in the September series on the Nifty.   All trades must be initiated on small volumes only.   The move by the government and regulators to ease investor tension worked today with the Sensex ending in the green, though after huge intra-day swings.

The Sensex swung 205 points between 8327 and 8121 before ending the day almost flat at 8222.59, a one point gain. The Nifty closed the day with a rise of 1.25 points to close at 2477.75.

Though volatility defined the day, there was relief the market ended on a positive note today. Except four indices -- PSU, bankex, information technology and oil and gas -- all the 17 indices of the Bombay Stock Exchange were up today. The market breadth also improved compared with yesterday.

Advances rose from about 12 per cent to 35.37 per cent, while declines came down to 63 per cent from 88 per cent yesterday. In all, 905 stocks advanced while 1631 stocks declined on the BSE. While front line stocks showed resilience, mid-caps and small-caps, too, recovered marginally.

A dealer of a leading broking firm said, “After a series of denials from various quarters that there was no sweeping investigation initiated against brokers, markets gained in confidence.”

Another dealer said, “The market desperately tried to consolidate as it gyrated in a range of 200 points. Ultimately, frontline stocks found some buying support. However, the mid-cap and small-cap stocks, which lack good fundamentals, continue to be weak.”

Brokers said the market would calm down only after the rollover of futures positions starts on Monday. The near-month September futures and options will expire next Thursday.

---

Yahoo! for Good
Click here to donate to the Hurricane Katrina relief effort.