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After the big decline the market is due for an 800-1,000-point rally in the Nifty50, but can you trade it and is it a real deal? That is something that is always tough. As of now, the case still remains that this sharp pullback is within a bear market.

Bear market pullbacks make it look like it is the real deal and the short covering bounce actually sustains. They also attract a lot of fresh investors to the market.

The market breadth is strong — something that is normally not the case in a short covering rally.

FII outflows have come down in the cash market — that data is screaming of short covering. There is no buying even in index futures. It is all short covering. Some 14,000 shorts are cut in futures 16,000 in calls. So that way it was a short covering bounce.

Can the Nifty test its 20-day moving average of 16,670? It is a falling 20-day moving average, so that zone could be somewhere around 16,550-16,600 levels.

On the Bank Nifty, it is somewhere around 35,290, which also is a falling DMA.

Watch the accompanying video of CNBC-TV18’s Anuj Singhal for more details

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