Indian equities are likely to open lower on Wednesday taking cues from the weak Asian markets. Traders are also likely to book profits after gains in previous session.
The addition to stock futures indicates that there has been fresh buying and the fact that a lot of 4500 calls that were written Monday are yet to be covered suggests that the short covering has room to go.
While a lot of short covering needs to happen, one must keep in mind that the Sensex and the Nifty both have tremendous respect for their 20 Day moving averages. They are still far away. The advice is to sell if the indices approach their 20 DMAs, which are at 15328 and 4545 respectively.
Supports exist at 14701 and 4360. Mid-cap tech, engineering and select oil stocks have the strength. We are unlikely to have a sharp run up in the morning. If that happens, sell into rally. Upstream oil could also do well, said VK Sharma, head of research, Anagram Stock Broking.
Most Asian markets pared intra-day gains and slipped in the negative territory on concerns of global economic recovery. Nikkei 225 was down 0.29 per cent, Shanghai Composite slipped 0.36 per cent and Strait Times declined 0.48 per cent.
The US markets bounced back to finish near intra-day highs as companies reported better than expected earnings from retailers and mixed housing data. US government data showed construction starts for single-family dwellings, the worst-hit part of the housing market, rose 1.7 percent last month from June to an annual rate of 490,000 units -- the highest since October.
The Dow closed at 9,217.94, The S&P 500 index ended at 989.67 and the Nasdaq Composite Index moved to 1,955.9.
Back home, Bombay Stock Exchanges Sensex ended at 15,035.26, up 250.34 points or 1.69 per cent. The 30-share index hit a high of 15134.51 and low of 14740.26.
National Stock Exchanges Nifty settled at 4458.90, up 71 points or 1.62 per cent. The index touched an intra-day high of 4491.45 and low of 4372.65.