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The market is in a very buoyant mood; the Nifty is cruising past all significant levels with much presto. It appears that conquering the 5400-mark is a high probability event for today. The FIIs have poured money in droves yesterday: US$ 750 million net of cash and F&O segment.

Everything seems to going for the bulls. The Nifty Put-Call Ratio (PCR) has jumped from 1.19 to 1.27; the open interest build up in the Nifty futures segment is quite substantial-more than 1.6 million shares were added. The Nifty VIX drops even further to 17.17, a loss of 45 basis points.

The international cues are also quite favorable barring Japan and South Korea none of the Asian markets that are open at the moment show positive swing this morning. The Dow is within striking distance of the 11000-mark.

What more the bulls could possibly ask for? Hardly anything more.

However, there are some worrying signs: lots of midcap and small cap stocks are going up 10 – 20% in a day and are moving like crazy. We are receiving stock recommendations much more than we ourselves offer. The oscillators are showing overbought readings in most cases.

Does that mean that we should book all profits and go short immediately? No, we don’t think so. All we suggest is due caution: while you need not book all your profits right away but do not be gung ho either for a profit taking spree can come in anytime above 5400. Our red-flag levels for the short-term are the range between 5408 and 5417. We tend to think that if the Nifty were to go beyond 5417 today it becomes susceptible to profit booking from any quarter. We do continue to believe that in April we are also likely to see the Nifty testing 5500-mark or do even better but a sharp sell-off shaking sky-high of the Johnny-come-lately bulls is probably getting overdue. Don’t get us wrong: we are not intending play spoil-sport; all we suggest is due caution and higher degree of vigilance since we have moved into a territory where landmines might have been laid for the unwary.

On the downside now, support is likely around 5354 and 5330 to start with and then strong support between 5302 and 5311. Unless you see a decisive fall below 5302 to find chinks in the bulls’ armor would be fairly difficult. In case, 5302 gets broken watch out for the range between 5282 and 5270.

On the way up before 5417 the level of 5391 might bring in some supplies while any price movement beyond 5417, the next significant level for the Nifty would be 5466.

Rajat K. Bose