Market to creep towards higher end of trading band: Udayan

The market was languishing at the lower end of the trading band around 5,200 and out of nowhere came a 90 point Nifty rally. So the Nifty is now tossed back within that trading range. For the trader there was quite a bit of leadership yesterday because of the way high beta stocks bounced back, infrastructure, real estate and even some of the banks. Even concept stocks like Bata and TTK started moving around which is usually a sign that HNIs are getting interested once again.

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The picture from here is a bit confusing, but it is safe to say that a break of the lower end of the range will not be very easy given that the market has been so resilient despite post Budget disappointment.

Traders will now watch whether the market can creep back to that 5,600 level over the next few weeks. When the market gets close to 5,600 they bet against it and when the market goes to 5,200 they bet for it, and so far this trade has worked out. But we will have to wait for the next few days to see whether this pullback is an anemic one and will fizzle out at 5,400-5,450.

Yesterday’s rally might have led to some of the bears getting a little less aggressive. Over the last couple of days the belief was that the market will fall below 5,170, but the further we get away from that 5,200 level the more confident the bulls get.

One thing which is clear is that the market is showing a lot of resilience despite the events of March not quite panning out as it would have liked. It has still not gone down to the lower end of that trading range, so it seems to be showing some kind of reluctance to go down. Also, at the slightest provocation it bounces back within that trading range.

So for now we are still rangebound and the market after yesterday’s rally probably will be feeling less bearish or less circumspect about being able to stay within that range.

One thing working in favour are the hefty flows on the market and stocks. Rs 6,000 crore came in yesterday in the cash market, but there was unwinding of Rs 1,000 crore of Nifty futures. The options data is all over the place because people are very skittish; just yesterday you saw quite a bit of unwinding in the higher calls and traders were quick to go out and start writing 5,300-5,400 puts once again. So the options market might not be a leading indicator because traders are merely adjusting their positions to reflect what happened the day before or on the current day’s trade. So it might not be best to take a directional cue from the options data at this point in time. We are still very much within that trading range and liquidity remains quite supportive and that has been the basic hypothesis of the market being able to stay in that range.