Nifty gave up the hope for a short covering rally a made a new low close to 5150 . It got well resisted in the mentioned resistance zone of 5240 where lot of long positions got squared off and it is evident that lot of short positions are lying there. This zone needs to get cleared for any short covering rally to happen. The volatility index is surprisingly not rising above 20 and it looks like a very dangerous sign for nifty to rise in the near future.
During the end of last bull market in 2010 when the market was at the top India VIX was trading at close to 15-16 levels and we are near those levels at 5200 levels in Nifty !Thus if nifty rises due to short covering or long accumulation the volatility index will definitely decrease and from there it would start rising again. In the coming months nifty would be very volatile giving sharp whipsaws so that the volatility should rise. Stocks like SBI ,Bank of India , ABAN, ACC look weak and l & t could see some short covering happening in the final hour of the trade. Dollar/ Inr would still be a buy on dips close to 52 levels and crude has started climbing up again. If we observe the commodities market we could that copper is still rising with good amount of short covering but a rising crude will still be a big concern. Lets keep a range of 5100 - 5240 and consider a small short covering rally on the break of the upper band of 5240.
