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The markets survived the IIP scare and closed on a high. A smart surge in the last hour helped indices tide over intense volatility. Nifty closed at 5,013 up 30 points, while the Sensex shut shop at 16,861 up 124 points.

Dipan Mehta, Member, BSE and NSE said investors are expecting the market to retest its lows based on possibilities of a US recession, oil touching USD 150 per barrel and other threats that exist in the global economy. He added that the chances of positive developments also exist in the market, which could take the market further up from these levels.

“All talk of market retesting its low is news driven and people expecting the market to touch new lows are basically betting on occurrence of some negative event which may or may not occur. It could be the US recession or oil touching USD 150 and many other threats which exist in the global economy at this point of time. If one is looking at the market retesting the earlier lows of the year, one is expecting some adverse event, which may or may not take place. At the same time, the chances of positive developments also exist in the market, which could take the market further up from these levels. As of now, its dependent on the news flow which we see coming over the next 2-3 months or so,” he said.

Technical Analyst Rahul Mohindar said the Nifty has moved from 4,890, which is a very interesting point or the trend decider level. "Above that, we have held those levels as well. We saw a good 4-5 day correction and traders are once again seeing an upside opportunity. Going forward, unless 17,100 crosses, I won’t enter the momentum and kind of an upside rhythm that we are really looking forward to. At the same time, I would recommend holding the Nifty long with a stop loss close to about 4,890."

Divya Mathur, Investment Director-Global Emerging Markets, SWIP, said the markets could face headwinds in the near-term though they see long-term value in India. "India is suffering from the same problems as some other Asian countries. There is the whole issue of inflation both on soft commodities, base metals, and energy. Not all of those is India specific, but once we can clear those, then the opportunities will be better for the Indian market. However, the government really needs to address those. We at SWIP are long-term investors and we see a lot of long-term value in India."

He feels sectors steel, cement and IT could go back to test the lows that it saw earlier this year. "However, we are bullish on stocks that will benefit from the domestic infrastructure story. It is a long-term theme and not a three-six months theme. So, we will be looking at companies that are exposed to infrastructure, be it on the power, or construction side. We will be taking this opportunity to buy the best-in-class companies whose valuations have come down to more attractive levels."

Technical Analyst Ashwani Gujral said today’s action is hinting at more pressure on the downside. "Going short would be advisable if there are any attempts over 5,000. Shorting at supports is never a bright idea because you will get such a sharp pull back that your stocks may get taken out because of any reason global or otherwise. If you get some kind of gap up above 5,000, fresh shorts should be initiated only at that point."

Source: Moneycontrol.com