Markets rebound but correction not over yet, say experts

Benchmark indices surged, with the Sensex gaining 1,961.32 points or 2.54 percent, while the Nifty was up 557.40 points or 2.39 percent. This marks their biggest single-day rally in five months. 

Indian markets surged over 2 percent on November 22, marking their strongest gain in five months. However, after weeks of sharp corrections, does this rebound signal the end of the downturn, or is it just a temporary relief? According to experts, the correction is likely not over yet. They believe the current rally is primarily driven by short-covering rather than fresh buying, suggesting that the market's downtrend may still persist.

Benchmark indices surged, with the Sensex gaining 1,961.32 points or 2.54 percent, while the Nifty was up 557.35 points or 2.39 percent. This marked their biggest single-day rally in five months.

The market recently dropped to its 50-week moving average of around 24,300 after being overextended and this triggered a technical rebound due to oversold conditions rather than fresh buying, said Milan Vaishnav, founder of Gemstone Equity Research and Advisory Services.

However, he added that a strong resistance at 24,000–24,100 may limit further gains, keeping the broader downtrend intact. And even if the recent bounce appears to be temporary, driven by short covering, there’s no clear confirmation yet that the market has stabilized or found a solid base and the correction still seems ongoing, he said.

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The India Vix rose by 0.67 percent to 16.10, indicating an increase in market volatility.

Markets have been very volatile and the sentiment is currently weak, said Deepak Shenoy, founder and CEO of Capitalmind.

Sudeep Shah, Deputy Vice President - Head - Technical and Derivatives Research at SBICAPS Securities said that recently, the market has been very unstable around the 23,300–23,400 level, moving up and down a lot and this kind of movement often suggests that the market might be settling into a solid base after a significant downward trend.

Some fund managers also feel that if the corrections continue, it is a good opportunity to buy.

"MSCI India Index is trading at just 10 percent premium over the MSIE World Index in terms of 12-month forward PE ratio. This is the lowest in the last seven years, if we exclude the COVID year, and is also much lower than 10 year average of 27 percent premium," said Alok Agarwal, head of quant and fund manager at Alchemy Capital.

He added that recently the GST, GDP, earnings, and capex numbers were weak and after the correction in the last six weeks, the risk-to-reward ratio has become attractive and every dip should be bought onto.

However, while valuations in some sectors have seen meaningful corrections, they may still not warrant aggressive buying across the board, said Krishna Appala, Sr. Research Analyst, Capitalmind Research. He added that opportunities exist in specific sectors and broader themes that hold long-term potential like urbanization, infrastructure, and consumption growth.

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