Volatile trade: Will Nifty hold crucial 5700 support?

It was an extremely volatile session at the markets. Markets swing wildly before closing relatively flat. Beaten down largecaps like Hindalco, Bajaj Auto, SBI and ICICI Bank led the pullback. The Nifty finally shut shop at 5,754 - down just 8 points, while the Sensex ended at 19,196 - down 27 points. The market registered turnover of Rs 1.7 lakh crore.

The Nifty showed great resilience in the last half hour of trade after testing the 5700 level. Although, the close was not as bad as the last couple of days, the volatile session has not been convincing at all. Sporadic rallies of 50-70 points got sold into intraday. It was more a short covering bounce but a comeback day for a lot of the beaten down stocks. The 5800 level from where the Nifty has bounced back a few times in the past may not support the market ahead due to abysmal FII flows in the new year, feels Sajiv Dhawan of JV Capital Services. "Unless FII flows resume, we might see further selling on any significant rally," Dhawan said. He says a lot of negative news flow on midcap companies has shattered the confidence of a lot of traders in the short-term. "Most traders feels they have lost in a month or so what they had made in the last 10 months." Technical analyst Anil Manghnani, Modern Shares & Stock Brokers is concerned with the way some stocks on the Nifty are breaking down on the charts. "Slowly even the stronger sectors are starting to give in. When that happens, it becomes difficult for the market itself to hold a particular level because the number of stocks that can get taken up drastically are being reduced and that is the concern going forward." Manghnani expects a bounce to between 5900-6000 before another sell-off sets in at which point positions can be lowered down. "I think there will be a short covering rally trying to buy for this 100-200 point move." Fundamentally, Dhawan feels that higher interest rates are a cause of concern for the markets. With the RBI being unable to curtail an out-of-control inflation through any significant measures, input costs are bound to have been under pressure, which may be reflected in the Q3 numbers of certain companies. However, Vivek Mavani, Vice President & Senior Portfolio Manager, Brics Securities sees the 5700 level being pierced in the next couple of days. "The momentum on the way down is going to effortlessly pierce 5700 on the Nifty." Mavani added if the FII selling doesn