The May series opened at Rs 30,592 cr as against Rs 27,060 cr last month wherein Nifty futures is Rs 13,580 cr and stock futures are at Rs 17,012 cr. The rising open interest indicates that there is more active participation and the confidence level is also coming back.

The volatility might be sharper in coming days as we have experienced on 28 and 29 April 09 in the Nifty.

Now, it is necessary that the market consolidates and form a strong base so that the current uptrend can sustain and the markets can test 3,800/12,500 levels in the coming days.

The overall trend is to remain cautiously positive as we have got enough uncertainty in May series. One is the election result and the other is the stress test results, which will have a very significant effect on the financial markets. The overall trend is positive but buying at higher levels should be avoided as prices in the current market scenario do not offer great risk or reward. Currently markets are overbought with the RSI at 66 suggesting higher level sell-off.

We have seen nifty making a double top of 3,511 and 3,517 and going forward we need nifty to sustain above the 3,520 mark for further uptrend to continue. Going ahead, we believe that the 200-day averages of 3,377 for the Nifty and 11,120 for the Sensex should act has a very strong support area for the markets. If that level gets broken then a panic sell-off is likely to be witnessed.

And this panic should be utilized to re-enter the market at lower levels from an investment perspective. In the near term the Nifty faces resistance at 3,520 and 3,650 levels while 3,330 and 3,150 are its important support levels. If Nifty breaks 3,150 then the markets could witness a sharp fall and we may test 2,910 to the extreme.

On the upside, the Sensex faces resistance at the 11,550 and 11,950 but seeks support at the 10,920 and 10,330 levels. So investors should wait for the markets to correct and then re-enter the market. Now the market is poised for a big event in the May series, we advice traders to maintain a strict stop-loss and buy on declines.

Stock Idea: Bharti Airtel, Infosys, Punj Lloyd and Welspun Gujarat should be bought on dips.