Nifty update for 28-03-2012

Nifty futures stayed within the mentioned range of 5180 and it just kissed the upper levels of 5290 too. The range got filled up quite clearly and once again nifty proved that it does not want to go down that easily. It is evident that lot of traders are accumulating long positions close to 5200 levels but the upper levels are getting tough to break. The situation reveals a typical range bound market in the picture with a positive bias as long as 5180 - 5190 levels is held by nifty futures.Volatility index gave a negative close with an increase in cost of carry and a positive open interest data. It shows a clear accumulation at lower levels and the equity market turnover data makes it more clear. Retailers who missed the previous rally are making good use of the current levels and buying some quality stocks like HUL and HDFC. Bank nifty is a major concern for nifty as it is consistently making new lows and ICICI bank and SBI are yet to recover from their bottoms. Among the major banking stocks Axis bank looks good and if nifty futures takes out 5300 levels this would be a major contributor in that up move. Thus bank nifty might need some more time to consolidate as the accumulation process is not yet started in banking stocks and selected metal stocks like tata steel and Jindal steel. The major contributors of nifty are far behind and the index alone is leading any up move and 1-10 of April would be ideal for a decent rally. If we look at the structure of nifty it is forming the same cyclical pattern before the final up move in 2010. In the year 2010 it spent quite a lot of time on 5200-5500 range and then broke out after 3-4 months. Thus as long as nifty keeping itself in a good range it is time to pump in some money. Lets keep the range of 5180 - 5330. On any up move 5300 levels could provide some good challenge for nifty. Thus if you are in a range bound market pick the bottom just like we got it at 5180 levels today and exit at the upper bands of 5330 - 5360 and make new positions in the new expiry season.Dollar/ Inr came down from the day's high and could be a little relief for the long positions in nifty, but we are not yet clear whether nifty needs more time for accumulation or see one more break down. Anyway keep in mind about the upside cap of 5330-5360 for any long positions. The volatility index has risen to 27 levels yesterday and any down ward move could get it to 30 - 31 levels. Just remember we have seen these kind of volatility at 4600-4700 and now we are seeing it at 5200-5300 levels and all the major market rallies happen when the volatility index is at its peak. Options writers , get ready to sell off the additional premium you are getting in near month options