Dalal Street experienced a highly volatile start on Tuesday, with the Sensex initially plunging by over 900 points within minutes of opening before staging a brief rebound. However, the index later tumbled again, with Sensex crashing more than 1,000 points by 10:30 am. The Nifty also slipped nearly 1%, reflecting the wild intraday swings that followed Monday's euphoric ceasefire rally. Most sectoral indices on the Nifty remained mixed, mirroring the market's nervous sentiment.
Market Volatility:
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The market experienced extreme volatility on Tuesday, with the initial drop followed by a brief recovery, only to face further losses.
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The Nifty and Sensex saw wild fluctuations as investors seemed jittery after the Monday rally, which was driven by easing geopolitical tensions and a sovereign credit upgrade.
Reasons Behind the Volatility:
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Monday’s Surge: The market's surge on Monday was seen as a result of optimism surrounding geopolitical stability and an upgrade in India's sovereign credit. However, much of this good news seemed priced in, leading to profit-taking and locking in gains on Tuesday, which triggered the intraday volatility.
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FII and DII Net Buying: According to Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, the 916-point rally in the Nifty on Monday was primarily driven by short-covering and retail interest, not big institutional inflows. Institutional buying was modest, at only Rs 2,694 crore, which suggests the rally was not backed by strong institutional momentum, limiting the potential for further upside.
Outlook for Indian Stocks:
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Medium-term View: Despite the volatility, the medium-term outlook for the market remains constructive, with the temporary ceasefire between India and Pakistan and a 90-day US-China tariff rollback expected to stabilize both global and domestic sentiment.
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IT and Pharma Stocks: Indian IT stocks are expected to benefit from an improving US economic outlook. However, pharma exporters may face challenges due to Trump’s drug price control order, which could create pricing pressure.
Technical Outlook:
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Anand James, Chief Market Strategist at Geojit Financial Services, offered a technical take on the Nifty's outlook, stating that early dips could happen, but if the index holds above 24,810, a resumption of the uptrend could be expected, with targets of 25,075-25,126. However, he suggested that the probability of any runaway moves in either direction is low.
Investor Sentiment:
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Experts are advising investors to remain optimistic yet cautious, avoid chasing rallies, and closely monitor global signals. Volatility may persist throughout the trading session, and investors are urged to stay vigilant for any signs of market stabilization.
