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The Indian stock market experienced a significant surge on Tuesday, November 19, 2024, with the benchmark indices, BSE Sensex and Nifty 50, registering substantial gains. The Sensex climbed 1,019 points (1.32 percent) to reach 78,358, while the Nifty 50 rose by 300 points (1.28 percent) to settle at 23,754. This dramatic upswing followed a period of correction, fueled by concerns about foreign outflows and weaker-than-expected corporate earnings. The market capitalization of all BSE-listed companies surged by a considerable Rs 6 lakh crore, reaching Rs 435.08 lakh crore. This sharp rebound prompted analysts to assess the underlying factors and predict the market's future trajectory. The recovery was attributed to value buying and the positive sentiment spilling over from global markets. All sectoral indices traded in positive territory, with notable gains in energy, realty, IT, and auto sectors. Key contributors to the rally included companies like NTPC, Reliance, ONGC, Power Grid, DLF, Brigade, M&M, Tata Motors, and Bajaj Auto.
The significant market correction that preceded this rally had left the Nifty and Sensex down 11 percent and 12 percent respectively from their record highs. Foreign investors (FIIs) had offloaded nearly Rs 1,400 crore in the cash market on the previous day, adding to the bearish sentiment. However, the Relative Strength Index (RSI) for the Nifty was below 30, signaling an oversold condition, suggesting a potential bounce-back. This situation provided the context for divergent expert opinions on the sustainability of the current recovery. Akshay Chinchalkar, Head of Research at Axis Securities, pointed to a similar market situation in February 2023, which subsequently resulted in a relief rally. He cited historical data from the last decade, indicating that similar downturns often lead to market rebounds within the next five days. Chinchalkar further highlighted that the short-term momentum was deeply oversold, reinforcing the possibility of an imminent bounce. He identified the Nifty support range of 23,200-23,300 as crucial, with 23,680 representing the immediate upside hurdle.
In contrast, V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, expressed a more cautious outlook. He believed that a swift and sustained recovery was unlikely, given the ongoing selling pressure from FIIs and concerns about weak earnings growth anticipated for FY25. Vijayakumar pointed to the loss of momentum that had propelled the Nifty to its record peak of 26,216 in September. While acknowledging the possibility of short-term recoveries, he cautioned that these were unlikely to endure in the face of continued FII selling and fears surrounding weak earnings growth. He predicted consolidation around current levels with sideways movements, suggesting that sustained upward trends would only materialize when incoming data pointed towards earnings recovery. The sustained weakness in mid and small-cap stocks, described by Vijayakumar as hundreds of stocks reverting to their mean values after exceeding their fundamentals, further contributed to this more pessimistic view. He cautioned investors against rushing into these potentially volatile stocks, suggesting that investors focus on resilient large-cap stocks instead. This divergence in expert opinions underscores the complexity and uncertainty inherent in predicting short-term market movements.
The contrasting perspectives highlight the complexities of market analysis. While the short-term rally offers a sense of relief, longer-term prospects remain uncertain. The actions of FIIs and DIIs are crucial factors. While FIIs were net sellers on Monday, offloading Rs 1,403.40 crore worth of shares, DIIs demonstrated significant buying activity, purchasing Rs 2,330.56 crore worth of shares. This unusual instance of DII purchases nearly doubling FII selling highlights strong domestic support amidst foreign outflows. Year-to-date figures indicate a net FII selling of Rs 2.84 lakh crore, offset by DII net purchases of Rs 5.54 lakh crore, reflecting the significant domestic influence on the market. The ultimate success of the market rebound hinges on multiple factors, including the resolution of global uncertainties, the announcement of positive corporate earnings, and continued confidence in the Indian economy. The conflicting expert opinions, therefore, serve as a crucial reminder of the inherent risks and uncertainties in stock market investments, underlining the need for careful consideration and diversified investment strategies.
Source: Bulls Gain Control: Sensex Surges 1,000 Points, Nifty At 23,750; Why Are Markets Rising Today?