Last week was marked by extreme volatility wherein the Nifty plunged by another 2.1% on a weekly basis. Initially, 5400 levels proved crucial supports during the week where it held twice and bounced back. However, intense selling in Friday’s trade broke the cushion of 5400 levels with an intraday swing of almost 250 points. Near month futures have eroded their sustained premium and closed at a discount of more than 10 points. On the options front, despite significant accumulation at 5400 Put strike, the Nifty has closed below these levels. Further pessimism can be expected if the Nifty is unable to sustain above 5400 levels in the next couple of trades. On the higher side, accumulation at the 5600 Call-strike poses a significant resistance. The Nifty has an immediate support at 5350 and resistance at 5560 levels. Any breach of these levels will decide the further directional movement in such a volatile market.
India VIX (Inverse relationship between Nifty and Indian VIX)
· Volatility for 4th February, 2011 close at 24.4 which is 7.6% higher as compared to previous close, after touching an intraday high of 24.8 and low of 21.9
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