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The Indian stock market experienced a dramatic rebound on November 22nd, with the Sensex and Nifty 50 indices soaring by over 2%. This significant upswing, following a decline of more than half a percent in the previous session, was primarily driven by strong performances from heavyweight stocks such as Reliance Industries, Infosys, and Tata Consultancy Services (TCS). The Sensex opened at 77,349.74 and closed at 79,218.19, a gain of 2062 points (2.7%). Similarly, the Nifty 50 climbed 2.6%, reaching 23,956.1 from its opening of 23,411.80. This surge resulted in a nearly ₹4 lakh crore increase in the overall market capitalization of BSE-listed firms, reaching approximately ₹429 lakh crore.
However, despite the impressive gains, experts remain cautious about the sustainability of this rally. Many believe the rebound is primarily driven by technical factors rather than fundamental improvements in the market. The absence of fresh, positive economic triggers fuels concerns about the rally's longevity. Shrikant Chouhan, Head of Equity Research at Kotak Securities, highlighted the market's oversold condition as a potential factor contributing to the quick pullback rally. He identified key levels to watch, suggesting a potential further rise to 23,500-23,550 if the Nifty 50 surpasses 23,400. Conversely, he warned of accelerated selling pressure below 23,250, potentially leading to a drop to 23,175-23,150.
Several analysts expressed concerns that this might be a 'dead cat bounce,' a temporary recovery in a declining market. Avinash Gorakshakar, head of research at Profitmart Securities, cited lingering concerns about the Russia-Ukraine conflict, weak Q2 earnings, and significant foreign capital outflows as reasons for caution. He emphasized the need to wait and observe market behavior over the next few days, particularly considering the Maharashtra assembly election results, which could significantly impact market sentiment. Prashanth Tapse, Senior VP (Research) at Mehta Equities, also suggested that the rally could be influenced by algorithmic trading and institutional buying triggered by the market's approach to its 200-day moving average (DMA).
The market's performance is further complicated by the weak Q2 earnings, stretched valuations, and pervasive global uncertainty. Experts advise investors to adopt a stock-specific approach rather than focusing solely on index levels. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, acknowledged that the market could recover from the recent downturn, largely attributed to the fallout from the Adani issue. However, he expressed skepticism regarding a sustained recovery given the prevailing headwinds. The upcoming Maharashtra election results on November 23rd are considered a crucial short-term trigger for the market, with experts anxiously awaiting their impact.
Looking further ahead, Gorakshakar pointed to the upcoming US presidential election and the potential influence of Donald Trump's presidency on global market sentiment. He anticipates a lack of dramatic market shifts until after Trump's assumed presidency in January, suggesting that meaningful market activity might resume only after the first week of January. The February budget is another significant event expected to shape market sentiment. Additionally, the typical decrease in market volume due to foreign portfolio investors (FPIs) taking holiday breaks in December, particularly after December 15th, is expected to further influence market dynamics. In conclusion, while the Indian stock market demonstrated a significant rebound, numerous factors suggest a cautious outlook regarding the sustainability of this rally in the near term.
The analysis presented in this report is purely based on information available publicly and expert opinions. While the information provided has been gathered with diligence, it should not be taken as financial advice. Individuals should always consult with their financial advisors or conduct thorough due diligence before making any investment decisions. This report also incorporates viewpoints expressed by several financial analysts, and the perspectives presented do not necessarily reflect the views of the report’s author. It is crucial to acknowledge the inherent risks involved in any investment, and past performance is not indicative of future results.
Source: Stock Market Today: Reliance, Infosys drive Sensex up by 2,000 points. Will rally sustain?