Though the benchmark Sensex of the Bombay Stock Exchange ended 205 points short of the psychological 16,000-mark just two days away from the derivatives settlement, market analysts stand divided as short-term pointers give out ambivalent signs.
While the Sensex ended Tuesday at 15,794.92 points, up 0.40 per cent, the broader Nifty of the National Stock Exchange closed the day almost flat at 4,620.75 points.
“The put-call ratio (PCR) was 1.73 on Monday. Market participants usually get very cautious once the PCR crosses 1.8. But this time around, the futures and options open interest (on the NSE) is also very high—at Rs 93,000 crore on Monday. The Sensex may move 200 points up or down in the short term. Small investors should be very cautious,” says Anil Gupta, derivative analyst of Religare Securities.
The put-call ratio, in effect represents the strength of bulls and bears. At 1.73, it means that against each bearish view, the count of bulls is just 0.73 – a sign of weakness. However, a high PCR need not necessarily mean an approaching correction as a move upward (against the expected direction of bears, who are more in numbers), could force them to cover their shorts or puts (equivalent to sell in cash market), thus giving further impetus to the market.
One encouraging aspect of this bull-run has been that money flow into equities has been pretty strong. Analysts think that the pace at which foreign money is flowing in, the Sensex can conquer 16,000 in no time.
“The liquidity flow into the market has been so strong that 16,000 is very much possible in the near term,” says Sandeep Shenoy, strategist of Pioneer Intermediaries.