June series expiry may trigger volatility

The markets behaved along expected lines as the weekend factor spiked the upsides potential as well as the traded volumes. The 4233 support advocated for Friday held as the Nifty spot bounced from the 4242 mark.

Market breadth was marginally negative as the BSE & NSE combined advance decline ratio stood at 1766 : 1863. The capitalisation of the breadth was however positive as the combined exchange figures were Rs 7894 crs : Rs 6719 crs.

The F&O data for previous session indicated a 2.65 per cent increase in net long positions as the bulls ramped up fresh exposure even in the face of the June F&O expiry.

The indices have indicated a key reversal on the charts (the closing is lower than the opening) at a significant high (SiHi) of the current upmove. That the traded volumes on this key reversal day were lower can only be a minor relief as the intraday high at the 4278 levels will now be a hurdle for the bulls to overcome.

Unless the 4278 levels are overcome on high volumes and increased open interest, traders should lay off fresh purchases. The 4242 level will now act as a swing reversal and a consistent trade below this mark will act as a bearish trigger.

The outlook for the markets on Monday is that of caution as bulls are likely to witness some resistance from profit sales and possible short selling if the overseas cues are negative. The impending expiry of the June series will act as a catalyst for higher volatility. Lower risk appetite players are advised to cut back trading exposure in coming future.