Bulls came roaring back on Dalal Street on Tuesday as positive trends across most Asian markets and bargain hunting after the recent rout helped the benchmarks Nifty and Sensex stage a rebound, after a three-day meltdown.
The much-awaited bounceback comes after the bloodbath in the last session alone wiped out Rs 16 lakh crore in market capitalisation. That said, the market trajectory was much more positive today, with all sectoral indices closing the day in the green territory.
The Sensex gained 1,089.18 points or 1.5% to end at 74,227.08, and the Nifty surged 374.25 points or 1.7% to settle at 22,535.85. The market breadth also tilted heavily in favour of gainers as nearly four stocks rose for each one that fell.
Much like the headline indices, buying activity remained strong across the broader market as well. The mid and small cap 100 indices also mirrored positive trends with gains of over 2% each.
What gave bulls an upperhand?
The stellar moves in today's session mirrored the upwing in major Asian markets like Japan and Hong Kong, which were left battered in the wake of Trump's heavy tariffs in recent days.
Meanwhile, the Reserve Bank of India's monetary policy decision, due on Wednesday, also remained on the radar, however, widespread anticipation of a quarter-sized cut provided some comfort.
With this, the market's fear barometer, the India VIX also cooled down 9% today. The panic that arrested the market in recent sessions had ticked off an upswing in the India VIX index of over 60% to a five-year peak in the last session.
Another major pillar of the recovery was the rush to hunt for quality stocks, now available at cheaper prices after the sharp market downturn. To that effect, all sectoral indices glimmered in the green while the broader markets clocked in a much stronger bounceback.
Will the rebound sustain?
While several market experts anticipate India to have better chances of holding up against the ongoing global turmoil as compared to most Asian and emerging market peers, the optimism is likely to take some time to reveal itself.
There is also mounting uncertainty, not just around Trump's tariff plans, but also on how other economies might retaliate to it. While India currently does seem to have a better insulation from the tariff tantrums, in a scenario of a full-blown multi-front global trade war, its immunity might be quick to fade away. What that means is volatility is likely to tower high in the near term, with several market participants taking on a 'sell-on-rise' approach.
To that effect, several market experts suggest investors to take on a 'wait-and-watch' mode as of now and let the air around tariff-related tensions clear out.
The technical setup further supports this view. "Despite this recovery, the overall trend remains down since the Nifty 50 is still positioned below its 5-day exponential moving average (EMA). However, support levels for the index has moved up to 22,341 points, while resistance is placed in the range of 22,800-22,900 points," said Nandish Shah - Deputy Vice President, HDFC Securities.
