Market Summary

I had cautioned investors in this blog on 1st June itself that June Series has a good amount of Short build-up ... Nifty is falling ever since that time and we have more Red remaining in this Series !!!

Settlement considerations may cause extra volatility and lead to a temporary improvement on short covering.


Inflation spiking to double-digits led to a market crash. The Nifty ended down 3.75 per cent, closing at 4347.5 points, which is a 10-month low. The Sensex was down 4.07 per cent closing at 14571.
There was continuation of heavy sales from the FIIs. Domestic institutions were also sellers. Breadth signals were terrible with advances heavily outnumbered by declines. Volumes were low. The Junior was down 4.03 per cent while the BSE 500 lost 3.64 per cent.


Outlook : The Nifty is likely to seek support at around 4200 before it attempts a substantial recovery. The upside is likely to be capped by resistance at 4600-4650 level. Settlement considerations may cause extra volatility and lead to a temporary improvement on short-covering.

Rationale : On Friday, the market broke key supports. This was a low-volume breakout but the minimum target projections would be about 4200. There is fairly good support at that level. Short-covering could cause some recovery during next week but the market is clearly in an intermediate downtrend (7 weeks and counting) that could get worse.

Counter-View : It would take a very strong trigger in the form of good news to lift the market now. Technically speaking, we would need a high-volume recovery that pushed the market beyond 4650 to break the pattern of an intermediate downtrend.

Bulls & Bears : Any bullishness next week is liable to arise on the basis of short covering and able to terminate at around Thursday June 19th levels. Banks for example, have been very hard-hit and there could be candidates here.

IT is another possibility because of the falling rupee and the cushion it offers. Oil exploration is a third segment. But the vast majority of stocks have emulated the index in that they have made clear downside breakouts. Despite settlement considerations, the prudent trader would be advised to stay on the short side of the market or to stay out.

Among the most badly hit sectors are real estate, housing finance stocks, construction companies and automobiles. No surprises here since these are all rate-sensitive and driven by consumer sentiment.