Bank Nifty Report [15-05-2023]: Five more states in quick succession going into polls late this year, in addition to general elections in 2024 had made Karnataka a battle ground, which markets had also had been following, given how it responded last week, despite US CPI returning weak numbers.
An anti incumbency wave was already priced last week, which should cushion any volatility that may Monday would have to face, as it weighs the margin of victory.
India VIX eyed
Eyes would be on VIX, as it had begun to rise from near record levels to the 13 vicinity, but it is not threatening yet, to accompany a collapse. We would closely watch its progress though, as any rise above VIX could be a signal towards a steep rise in volatility expectations.
This is one of the reasons that will moderate the expectations of achieving the measured objective of 18,500 in Nifty. Yet another reason that clouds the prospects of upsides is the potential for mean reversion, given Nifty is 4.5% above the 50 DMA, an event last seen only in November 2022, post which Nifty corrected from the record peak. A collapse past 17,800 is certainly ruled out, with 18,195/150 service as the downside marker for now.
