Nifty, Sensex Rally Over 1%; Overselling Leads To Bounce Back
Despite the recovery, experts emphasise that this move does not signify the start of a bullish trend
Indian stock markets saw a strong recovery on Tuesday, with both the Sensex and Nifty surging over 1.25 per cent in early trade.
The Nifty 50 rallied more than 300 points to reach 23,770, while the Sensex jumped over 1,000 points to 78,410 at the time of reporting.
Market experts attributed the rally to positive global cues and an oversold market condition. However, they cautioned that the underlying challenges for Indian stocks persist.
These include continued foreign portfolio investor (FPI) selling, albeit at a reduced intensity, corporate earnings downgrades, slower economic growth, and high real interest rates, which are dampening growth impulses.
Ajay Bagga, Banking and Market Expert stated, "Positive global cues and a heavily oversold market are seeing a 1 per cent to 1.5 per cent bounce in the Indian markets today. The causes of the downtrend in Indian stocks are still very much present, FPI selling (though at a reducing intensity), downgrades to corporate earnings, slower economic growth and high real interest rates which are proving a drag on growth impulses."
Experts also noted that the technical indicators also pointed to the potential for further gains. The Nifty's rally has the chance to extend if it closes above the lower Bollinger Band, currently near 23,490.
Akshay Chinchalkar, Head of Research, Axis Securities said, “The Nifty's 300-point rally has the potential to extend given a rare signal that's occurring, particularly given how strong the recent downtrend has been. If the nifty ends above the lower bollinger band today, currently near 23,490 it would generate something called a ‘bollinger outside inside’ signal which occurs when a close below the band on the previous day is immediately followed by a close above it.”
If this were to occur today, the next logical upside target would be the 20-dma which sits near 24,125 currently. Support inside the 23200 - 23300 area will remain critical on the downside, added Chinchalkar.
Despite the recovery, experts emphasised that this move does not signify the start of a bullish trend. FPI selling is expected to continue, but domestic investors with available funds may find opportunities in stocks that have corrected significantly.
“The markets are showing initial signs of recovery. FIIs will likely continue to sell, but domestic investors sitting on cash will see value in buying into stocks that have corrected significantly and are available at reasonable valuations. However, this move doesn't mean a bullish market,” said Shriram Subramanian, Founder and MD, Ingovern Research Services.
Market sentiment could further improve depending on the Maharashtra election results. If the Nifty manages to close above 24,000, it could signal a more sustained upward movement.
Overall, while the markets showed signs of recovery, experts remain cautious about the sustainability of this bounce amid ongoing macroeconomic challenges. (ANI)
