Call it selling on news after the budgets failed to announce any big-bang reform measures, or call it routine profit booking after Nifty touched a new
high. May be the selling trigger was the negative divergences on the technical indicators that failed to touch new highs with the index. Whatever the reason(s), the index underwent a 5% correction (less than 400 points) from its peak that lasted all of 5 trading sessions. After turning net sellers for the previous 3 trading sessions, FIIs were net buyers. Both WPI and CPI inflation eased, mainly due to lower food prices. That doesnt mean RBI will reduce interest rates right away. The deficient monsoon is still a concern. So is the increase in the current account deficit. Tracking the momentum, the 50-share nifty index was trading in a narrow range, psychological levels of 7600, led by gainers index Capital goods, Consumer durable, power and realty.
Traders are advised to be highly cautious. Stop losses at 7620, 7600 and strict stop loss of 7560 is recommended. On the upside the markets may try to crawl back towards 7700 but resistance becomes stiffer over 7660. Option traders may hold 7400 call options with same stop loss.