Stock market today: Sensex, Nifty stage recovery; rebound ahead?

Benchmark stock indices Sensex and Nifty gained in Tuesday’s trade on value buying, after falling in the last several sessions. A fall in the 10-year US bond yield and a weak dollar that pushed emerging markets higher earlier today aided sentiment.

Sensex stood at 77,759.67, up 420.66 points or 0.54 per cent. The 30-pack index had fallen in the previous four sessions. Infosys, Reliance Industries, HDFC Bank, Mahindra & Mahindra and Tata Consultancy Services (TCS) contributed most to the Sensex rise today. Tata Motors and M&M rose over 2 per cent each and led the Sensex gainers.

Nifty gained 128.40 points, or 0.55 per cent, to 23,582.20. This 50-pack index had fallen in the previous seven sessions. 

“The last time that happened was in February 2023, which led to a relief rally and historically looking at the last decade, such downstreaks have mostly led to the market rebounding over the next 5 days,” said Akshay Chinchalkar, Head of Research at Axis Securities.

Chinchalkar said the short-term momentum is also deeply oversold with the recent decline dropping below the regression channel drawn from the March 2023 lows, which means a bounce is overdue. “Holding the Nifty support range of 23,200-23,300 zone is key while the 23,680 level remains the immediate upside hurdle,” he said.

Deepak Jasani, Head of Retail Research at HDFC Securities noted that US stocks also attempted to rebound from their worst week in months overnight as investors there awaited Nvidia’s third-quarter earnings due on Wednesday.

V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services though feels a quick and sharp recovery is not in sight. The momentum that drove the Nifty to its record peak of 26,216 in September is gone, he said.

There can be recoveries, which are unlikely to sustain given the selling mode of the FIIs and the concerns surrounding the weak earnings growth feared in FY25, he said.

“At best the market may consolidate around the present levels with sideways movements. Sustained up moves will emerge only when incoming data indicates earnings recovery,” he said.

A significant trend seen in recent days is the sustained weakness emerging in a large number of mid and smallcaps. 

“Hundreds of such stocks, which had run ahead of fundamentals, and driven by momentum are reverting to mean. Investors need not rush in to grab these stocks which have more downside potential. In contrast, quality largecaps are resilient and investors can stick to them,” Vijayakumar said.

Amid heavy FPI selling, it is the domestic flows that have been supporting the market. In its latest strategy note, Kotak said the stock market may hold up or even go up as long as non-institutional investors stay convinced about making high returns in the market based on past returns and  trailing returns stay reasonably high. 

The latter is obviously valid up to a point only, Kotak said adding that a period of low trailing returns could dampen return expectations among retail investors.