Benchmark stock market indices rebounded strongly on Friday, recovering from the previous session’s selloff, which was triggered by the expiry of the Futures and Options (F&O) contracts. The sharp upward movement was fueled by gains in heavyweight stocks such as Reliance Industries, Bharti Airtel, L&T, and ICICI Bank, all of which helped boost investor sentiment and confidence. The market recovery showed resilience despite the earlier setback, as investor optimism was reinvigorated by favorable developments and stock-specific action.
By 1:25 pm, the S&P BSE Sensex had gained a substantial 786.37 points, reaching 79,830.11, while the NSE Nifty50 rose by 232.25 points to 24,146.40. This rebound followed a volatile trading session the day before when FPIs (Foreign Portfolio Investors) sold a massive Rs 11,756 crore worth of Indian equities, triggering a wave of selling and exacerbating market volatility. This selling pressure raised concerns about potential bearish trends in the Indian stock market.
The recovery in the indices came despite most Asian markets trading lower on Friday. Optimism among Indian investors was buoyed by reports suggesting that the U.S. government might impose less severe export restrictions on China. This news had a ripple effect across global markets, lifting Chinese stocks and subsequently boosting investor sentiment in India. This shift in outlook provided a much-needed boost to the Indian market, reversing some of the negative trends seen earlier in the week.
However, analysts caution that the market is not out of the woods yet. Despite the rebound, market experts continue to highlight that the Indian stock market remains in a vulnerable position, as evidenced by the recent foreign outflows. According to analysts at Nuvama Institutional Equities, the Nifty50 is likely to fluctuate between 23,450 and 25,000 in the near term. While a sustained move above 24,400 could rekindle bullish momentum, failure to hold above key levels could confirm a bearish outlook. Investors are advised to stay cautious and assess the market's movement carefully before making decisions.
Sameet Chavan from Angel One noted that the banking sector would be crucial for maintaining the market's upward momentum. Banking stocks, in particular, were expected to be the key drivers of any sustained recovery. He pointed out that while the market had shown resilience, there were still resistance levels between 24,050 and 24,150 that investors needed to overcome. The broader market, particularly midcap stocks, was seen as offering some stability, with select stocks in these segments expected to perform well in the coming weeks. However, Chavan also warned that the market might face headwinds if it fails to break through these resistance zones.
On Friday, the rally was particularly strong in telecom, pharmaceutical, and consumer goods sectors. Bharti Airtel, one of the top gainers, surged 5.32% to Rs 1,643, continuing its positive momentum amidst growing optimism in the telecom space. The pharmaceutical sector also performed exceptionally well, with Sun Pharma and Cipla rising by 3.48% and 2.92%, respectively, reflecting the renewed investor interest in the healthcare and pharma sectors. Other stocks that contributed to the overall market rally included L&T, M&M, Adani Ports, and Tata Consumer Products, all of which posted gains of up to 2%.
A significant development was the inclusion of 45 additional stocks in the NSE’s F&O segment, including Indian Bank, LIC, Adani Green Energy, DMart, and Zomato. According to Prashanth Tapse of Mehta Equities, this expansion could lead to heightened stock-specific activity and attract fresh investor interest, especially with the December F&O series approaching. The inclusion of these stocks in the derivatives market is expected to bring more liquidity and volatility, offering traders new opportunities to capitalize on price movements.
Despite the positive performance on Friday, experts continue to advise caution. V.K. Vijayakumar of Geojit Financial Services remarked that the potential for short-term gains with a "buy on dips" strategy might be limited, as the market remains volatile and uncertain. However, he suggested that investors with a medium- to long-term horizon could benefit from accumulating stocks in sectors like financials, IT, capital goods, and telecom, which are currently seen as attractive.
The recent outflows of FPIs from Indian markets have added to the uncertainty, as investors worry about the sustainability of the recovery. Vijayakumar emphasized that a "wait-and-watch" approach would be prudent in the current environment. While stock-specific opportunities may arise, he cautioned that broader market trends could remain volatile, making it essential for investors to remain selective in their stock picks. The market is likely to continue to experience fluctuations as both domestic factors, such as corporate earnings and economic data, and global developments, including geopolitical risks and U.S. monetary policy, will play a crucial role in shaping investor sentiment.
Looking ahead, the market will be closely monitoring key economic indicators, including the upcoming Q2 GDP data and corporate earnings reports, which could provide further clues about the health of the Indian economy. The outcome of the global economic environment, including any changes in the U.S. Federal Reserve's stance on interest rates, will also have a significant impact on investor sentiment in India. As such, while there is room for optimism, investors are advised to stay vigilant, diversify their portfolios, and carefully assess market conditions before making investment decisions.
