Alex Mathew, head - research centre, Geojit Financial Services, said that the stock market, on Tuesday (Sep 30), recovered a lot from its lows on reports from the Finance Ministry that state run banking institutions do not have risky exposure, and the fundamentals of Indian economic system are really strong. 

Mr. Mathew said, “It is very interesting to note that US Chicago Board Options Exchange’s volatility Index has increased by 39% to 48.4% and finally closed at 46.7% yesterday.”

He also said that Volatility indexes are inversely connected with the stock indices. Above 30, volatility index looks very risky. Dow may breach 10,000 mark and may test 9,810 before it gets well. 

NSE Volatility Index ended at around 34, which registered a high of 54% on January 2008 and so seemed to be better positioned.

“ICICI Bank options attracted highest implied volatility, which was around 60-80 suggesting highly volatile movements ahead. The stock shed 181,125 shares as open interest, suggesting short covering. Central banks comments on ICICI Bank that ‘ICICI Bank has sufficient liquidity to meet requirements of depositors’ also boosted the banking sectorial stocks,” he added.

``Nifty may face 4,064 as resistance and support at 3,880 and 3,800. If Nifty does not close above 4,100 in a day or two we may see more pain in indices. Investors are advised to hunt bargain buys, but should have a Nifty mini or Nifty futures in their portfolio for hedging,`` he recommended.

While commenting on the market condition, Mr. P. K. Agarwal, president - research, Bonanza Portfolio, said that Indian equities opened gap, on Sep 30, down after, US Congress disapproved $700 billion bailout plan. 

Nifty made new 2008 low at 3,715, but got well smartly. Nifty also touched a high of 3,966 gaining over 250 points from the lows and ended the day at 3,921.

“Unitech, ICICI Bank, Idea, TCS and Banking sector saw good buying interest. Weakness was seen in otherwise defensive sector FMCG, SAIL, Siemens, Tata Steel, Ranbaxy. Markets are likely to remain volatile in view of short week (Thursday being holiday). Support is near 3,700 levels. On upside resistance is likely around 4,000 levels,” Mr. Agarwal added.