April series saw Nifty conquering the previous peak of 11,760 on a closing basis while registering an intraday all-time high of 11,856. However, throughout the month the price activity in the market was typically consolidative in nature. The broader market momentum was missing that led to some selling pressure pushing the index down towards 11,550. Leading sectors included banking, financial services and IT while metals and auto stocks have failed to give a medium-term breakout.
India VIX, which generally ranges between 12-18, is currently seen at around 23, which is relatively higher. A high VIX indicates higher volatility anticipated by market participants over the next few weeks.
During the 2014 election period, India VIX made a high of 39.30 while during 2009 the same was seen at 87. Owing to the face that the election outcome will have a significant impact on the markets, an elevated VIX is normal phenomena and not much should be read into the same.
The month of May is expected to remain highly volatile which is reflected in the elevated numbers of the volatility index. For Nifty, 11,890 is expected to act as stiff resistance for the short term. Unless the same is crossed, selling pressure cannot be ruled out. The immediate support is seen at 11,550, which is the last swing low. A breach below the same can intensify the sell-off and the market may plummet towards the March range breakout area of 11,100-11,000. For the index to continue its present upwards journey, a decisive breach above 11,900 along with broader market participation would be required.
However, from a slightly longer-term perspective, the larger setup for the market remains positive. Investors should remain invested and use any meaningful correction to accumulate quality frontline and select midcap stocks.
We believe that Nifty has formed a major base at 10,000 and going ahead it should scale to 13,000-13,500.
For traders, a 5-6 percent fall would provide a good buying opportunity. We would advise going aggressively long at around 11,200-11,100 or if the index crosses 11,900 mark. We would place the initial target at 12,400.
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Source: Moneycontrol
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