The last hour of trade is turning out to be the nemesis for our market. After a 200 point climb in the morning, the Sensex sold off towards the end on Monday to close barely in the green. Mid-caps fared even worse with the advance-decline ratio turning negative. This is exactly what had happened last Friday. A pullback that got sold into in the last hour of trade. What is even more disheartening is that global markets were firm on Monday. Not only had the US market given a good cue, most Asian markets closed with gains and Europe had opened higher while we were trading. None of that mattered as prices slipped suddenly in late trade.
Foreign institutional investors, which sold Rs 3,600 crore of Nifty futures last week, did not seem to be in any rush to cover their shorts. With a higher opening one would have expected to see the shorts scurrying for cover. However, the Nifty futures discount did not vanish; in fact, it remained stubbornly above 20 points through the day, perhaps reflecting reluctance on the part of the bears to cover shorts just yet. Or it could have indicated a fresh pile-up of short positions at higher levels. The Nifty is still poised precariously at its support of around 4,150. Tough for traders to initiate big directional bets, long or short, from these levels. The pendulum could swing either way.
There is no denying that the ticker is betraying some weakness. Rallies are not sustaining, the breadth weakening and the futures data indicating some bearishness. Ordinarily, traders would have inferred that a correction was getting under way. But this market has been so full of surprises that such inferences are fraught with risk. The Nifty has shown all these signs in the not so distant past and then confounded by breaking out on the upside. Quite typical, as the market after all, like cricket, is a game of glorious uncertainties, though not always very profitable ones.
(The writer is Executive Editor, CNBC-TV 18)