It was one of the most volatile day for the markets in recent past wherein Sensex opened weak with over 150 points cut following second steepest ever drop yesterday and proceed to trade extremely weak on account of subprime issue coupled with Yen carried trade. Sensex fell nearly 600 points by the mid session but in post lunch trade the bulls put up brave fight leading to spectacular recovery over 500 points. But finally, bulls could not maintain their momentum and again markets slipped in late trade on the back of sharp sell off witnessed in metal and IT stocks.

Sensex ended down 216.69 points or 1.51% at 14141.52, and the Nifty was down 70.55 points or 1.69% at 4108.05. About 1010 shares have advanced, 1940 shares declined, and 52 shares are unchanged.

BSE Midcap was down 92.97 points or 1.46% at 6,259.47 and BSe Smallcap was down 102.46 points or 1.31% at 7,694.80.

Ketan Karani, VP Research of Kotak Securities says, “I think the recovery was overdue. We were getting hammered by triple digit falls everyday and nervousness was there all round. So at some level, the buying was supposed to come in. The market has bounced back from 200 day moving average and a reasonable amount of short covering along with long investment buying was seen. We believe for the day, this should at least continue.”

He is advising his investors to purchase, but be cautious. “We have been advocating buying as of today and we have been buyers in lot of the frontline stocks. We have been buyers at lower levels and as of date, I do not know what is the strategy being followed. But we have been buyers since morning, since the fall around 14,000 and below 14,000 was activated. We have been advising clients to purchase in a staggered and selective manner and be very choosy with the stocks, which you would want to invest.”

Looking forward, Karani feels that we are in a structural economic bull run. “We believe the economy is doing the right things and yes, global things have impacted us significantly, not as significant as they have impacted the global markets, we have been lesser impacted. But there was too much of complacency among traders and among investors. So the complacency has gone away, lot of loses would have been taken, profits would have been booked. From here we believe as and how the economy moves and how the news flow comes from the economic side, markets will tend to move up but liquidity will be the deciding factor. What kind of liquidity flows back to India and what kind of domestic liquidity is pumped back into the equity markets. So these two things will decide the course of direction going forward. But yes, bottom formation would be a process. Today’s bottom would be a good healthy bottom for reasonable long period of time. Let us see how it test going forward,” he adds.

Nilesh Shah, CIO of ICICI Prudential shares a similar sentiment. “The end game will be certainly bullish for Indian investors I have no doubt in my mind about it. The moral of the story is that if you are domestic investor base is not strong enough to take the global volatility then your markets will slide down like this. Even if fundamentally it doesn’t warrant the same treatment,” he says.