The Indian markets ceded ground at the opening on account of  the weak global cues as selling pressure intensified post the negative opening of the European markets.

Initiation of fresh short trades after the benchmarks broke the key support levels aggravated the downfall. However strong support near its (Nifty) 50 day moving average and unwinding of short positions that coincided with the firmness in the European markets aided a sharp recovery back home.

Unconfirmed reports of aggressive longs positions on the Nifty Futures contract added to the euphoria. Resultantly, the markets not only erased all its intra-day losses but also offset losses made in the  previous trading session.

For now, the markets have managed to close above the key psychological and technical levels once again. As mentioned yesterday, the market witnessed an aggressive sell-off after it breached the support levels. The bounce from lower levels and a decisive close near the day’s high indicates that bulls may not give up as easily as before (recent past sell-off that easily broke the strong support levels).

Even though the sharp rally is driven by liquidity, whether today’s sharp pull back is just a bear trap that has led to a sudden spurt remains to be tested. For now though the upmove seems to have some leg although it faces strong resistance near the  week’s high.

However liquidity alone may not be enough and additional strong triggers would be needed hereafter for the markets to not only move into a higher zone  but also sustain at present levels in the derivative expiry week ahead that promises to be even more choppy than usual.