Watch out for market unwinding

The markets opened on a subdued note and closed with minor losses as the benchmark indices surrendered their mid day gains on the lack of buying conviction within the bull camp. Traded volumes were higher than the previous session, which is a sign of caution coming on the back of a downtick session.

The negative market breadth confirms the weakness in the undertone as the BSE & NSE combined figures stood at 1335 : 2440. The capitalisation of the same was also negative as the combined exchange figures were Rs 8269 crs : Rs 10085 crs.

The F&O data for the previous session saw a net increase in long positions by 4.35 per cent amid lower volumes and a steady PCR.

The markets have not recovered from the weakness of the last hour of selling on Friday (July 13) and the charts have displayed a bar reversal as per western charts and a gravestone doji formation as per Japanese candlestick charts.

These are negative portends as the markets are now showing no signs of buying momentum that is required to keep up the bullishness.

My view remains as per yesterday’s forecast that rallies are likely to be elusive in the near term as the markets are appearing to shift gears and move closer to consolidation.

Whether this consolidation will turn to distribution, the coming few sessions will tell. Traders are cautioned again about enhancing exposure on the long side as the markets are appearing top heavy for now.

The outlook for the markets on Wednesday is that of abundant caution as some unwinding is likely to be seen in the near term. I continue to advocate abstinence from fresh aggressive long positions in the near future.