An evening walk down D-St: Volatility to stay till May 23, avoid leverage play

The benchmark indices managed to bounce back on May 16 after being pulled down by bears in the previous trading session. This is just the second positive close that the index witnessed in the month of May.

The final tally on D-Street – the S&P BSE Sensex rallied 278 points to 37,393 while the Nifty50 rallied 100 points to close at 11,257.

Among sectors the S&P BSE Oil & Gas rose 1.5 percent, followed by the S&P BSE realty that gained 1.3 percent, and the S&P BSE Power that was up 1.3 percent.

Volatility cooled down slightly but it is still near 4-year high. India VIX fell down 1.01 percent at 28.37. However higher VIX suggests that volatile swings could continue in the market ahead of the election outcome.

Experts feel that the volatility is here to stay till May 23. They suggest investors or traders should avoid leverage play as there could be wild gyrations on either side.

“Markets are volatile, awaiting the outcome of general elections and tracking mixed global cues. We do not see this changing any time soon thus advice limiting leveraged trades,” Jayant Manglik, President - Retail Distribution, Religare Broking Ltd told Moneycontrol.

“Nifty has immediate hurdle at 11,300 and its breakout would trigger further recovery else decline may resume,” he said.

Nifty formed a bullish candle and closed above 11,250, which is also its 100-day exponential moving average. The index took support at its 100-day moving average placed at 11,138 for the fourth days in a row.

For bulls to completely take charge, the Nifty has to close above 11,300 convincingly, suggest experts. “Going forward, a spike can be witnessed in either of the directions with a 200-point target based on the direction of the breakout,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.

“In simple words, a close above 11,300 can propel the index towards 11,500 whereas a breakdown below 11,100 can drag it down towards 10,900,” he said.