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The markets are trading at a slightly higher range than what we have seen over the last 14-20 days. At 5,000 to 5,500 range, we are trading somehow at the highest point in the last two weeks or so. So it is a good time to get a check on the markets internals; especially since we have been in this phase of consolidation after the January corrections.

In the past, looking at some of these internals, first if one takes a look at the breadth - for the markets to breakout, the time we have seen past breakouts since 2003 i.e. since the last five-years, we have seen the markets breadth for 2-3 days at an average about 2.5:1 or 3:1 or even better. So the market breadth definitely improves and trading volumes pick up.

On an average, FII flows at the time of market breakout is between about Rs 700-3,600 crore - this is the combined cumulative FII flows on the average of about 4-5 days when the market has broken out in the last three-years. We have seen stock futures see an OI buildup of about 5-10% over a week and we have also seen the Nifty and the BSE 500, so including your broader markets in a span of 5-15 sessions starting trading over the 10, 20, 50 DMA and 200 DMA,. So both short-term and long-term indicators need to intact on the technical side as well.

The global market correlation - MSCI World Index rallied 1.5-3% a week when our markets broke out of consolidation phase and MSCI Asia Pac Index ex-Japan, rallied 2-8%, on a weekly basis when our markets have rallied. Currently, if one takes a look at the current internal picture, then the advance/decline ratio only drastically improved yesterday where it was at about 2.5:1. Last 5 trading sessions have seen FII inflows of Rs 595 crore if one includes yesterday’s provisional figures as well.

Stock future OI buildup is at 5.8% over a week. The BSE 500 and the Nifty are currently trading over their 10,20 and 200 SMA, but are still trading below their 50 DMA; so they have not broken all those technical indicators. MSCI World Index up 2.9% from last weeks close. MSCI Asia Pacific ex Japan up 3.3% from last weeks close. So market internals are pointing in the positive fray right now. But still not the whole lot; as what has been seen in the past breakouts. But it should be interesting considering volumes have built-up and the rollovers have picked up since yesterday and we are going into that all-important Budget week.

Source: Moneycontrol.com