After a 14% correction since September end, benchmark indices have recorded around 2% gains in the past two trading sessions. The broader indices, which had fallen up to 24% from their peak levels, also gained around 3%, providing much-needed relief to investors. However, the key question remains: Will this recovery sustain?
Experts are divided. While most believe that this could be a ‘dead cat bounce’ – an unexpected jump after a long decline and typically before another drop, others believe that the reduction in valuations may help sustain this rally for some time.
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Nilesh Shah, MD, Kotak Mutual Fund, advises caution. “Some amount of buying seems to be emerging in select large caps as valuations are below historical averages. However, the continuous selling by FPIs needs to be watched as one swallow doesn’t make summer,” he said.
According to Rupak De, senior technical analyst at LKP Securities, the Nifty has broken out of a seven-session consolidation, leading to a strong upward move. Additionally, the index has moved above the critical 21-EMA on the daily chart, signalling a bullish short-term trend. “ In the short term, the index may move towards 23,150, while support is placed at 22,700 on the lower end,” he added.
However, Siddarth Bhamre, head of institutional research at Asit C Mehta Financial Services, still advise investors to be nimble-footed as he expects the market to fall more. “Market does not come down in a straight line,” he said, calling the current rise only a bounce.
Why are small and midcap stocks surging today?
Most experts believe that global factors like US President Donald Trump’s tariff threats cast a big shadow over market. Moreover, the US Federal Reserve’s policy, which began its meeting on Tuesday, would keep the markets on tenterhooks, besides other geopolitical uncertainties.
Rohit Srivastava, founder of Indiacharts, believes that the markets have bottomed out and an uptrend will be seen over the next one month led by financials and metals. According to Srivastava, 22,200 remains an important support for the Nifty, and on the upside, it can go to 24,600 in the next 3-4 months.
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