Market in overbought zone

The selling pressure in key index stocks in the late afternoon may lead to a minor correction tomorrow, the first day of calendar year 2008.

There was buying on the side counters as the market wide advance decline ratio was 5.44:1 compared with the Nifty A/D ratio of 2:1. While the large cap stocks moved sideways, the small and mid cap stocks were in great demand.

Kamlesh Langote of vfmdirect.com expects a marginal correction in the near future. The monthly relative strength index (RSI) at 83 indicates overbought conditions. A monthly RSI above 80 is known to cause a sharp correction. There were corrections in May 2006 and August 2007 when the monthly RSI was 87.

However, there is strong support for Nifty at 6,100 and thereafter, at 6,000. The Nifty Put options added 2.43 lakh shares at 6,100 and 1.13 lakh shares at 6,000 strike prices, indicating these as support levels. Resistance is seen at 6,300 and 6,400, where Call writing was seen.

Reliance Industries was listless on Monday with January futures prices declining marginally by 0.47 per cent. The trading volumes were half that of Friday despite the reduction in the lot size from 150 to 75. The State Bank of India was steady, with trading volumes remaining subdued despite a smaller lot size of 125 shares (250 shares).

Infosys, TCS and Wipro remained weak on account of fresh short positions. The futures contract of TCS closed at discount to spot with open interest increasing by 2.41 lakh shares. But the Infosys Technologies contract closed at a premium.