Nifty reclaims 19,000 as bears ease control; what's pulling the market higher?

All NSE sectoral indices were trading with gains with PSU Bank index up over 2 percent.

Bears eased control on Dalal Street as Indian equity markets staged a smart recovery on October 27. Sensex surged 500 points, and Nifty reclaimed the crucial 19,000 level on the back of positive global cues. This bounce back comes as a relief after six straight sessions of losses. According to market analysts, after such a sharp correction, a rebound was likely for the markets to stabilise.

What's pulling markets higher?

US GDP data optimistic

The US economy grew at the fastest pace in nearly two years last quarter, driven by a surge in consumer spending. Gross domestic product (GDP) accelerated to 4.9 percent, more than double the second-quarter pace, according to the government’s preliminary estimate. "The US economy’s resilience is surprising. The Q3 GDP growth at 4.9% means the Fed will continue to be hawkish and the likely ‘higher for longer’ interest rate regime is negative from the stock market perspective," said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

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Global Markets positive

Asian shares tracked Wall Street futures higher on October 27 as Amazon Inc provided some welcome earnings relief. Meanwhile, bonds were able to sustain a rally amid signs US inflation was easing. Both S&P 500 futures and Nasdaq futures rallied, driven by a 5% jump in Amazon shares in after-hours trading.

Taking the cue, Tokyo's Nikkei and Hong Kong's Hang Seng index rose 1 percent, while South Korea’s Kospi gained 0.65 percent. In the Asia Pacific region, Australian stocks bounced from a one-year low.

Nifty technical view

Nifty has indicated “Three Black Crows” on the daily chart extending the slide further to touch the 18850 zone achieving the initial downside target as mentioned earlier, with sentiment and bias maintained cautiously.

“The index would have the crucial support maintained near 18,600 levels of the important 200 period MA below which the matter can turn worse with 18,200 level as the next major base zone. The support for the day is seen at 187,00 levels while the resistance is seen at 19,100 levels,” said Prabhudas Lilladher in its report.

Also Read | Momentum fund manager says market throwing more ‘sell’ than ‘buy’ signals

What should investors do?

According to Kotak Securities' India Strategy, the correction in mid-cap and small-cap stocks is not meaningful enough, and the valuations remain expensive for the broader market. Large-cap stocks offer better reward-risk balance, given more reasonable valuations, the brokerage added.

"This is the time for cherry-picking for long-term investors. History tells us that corrections triggered by geopolitical events were opportunities to buy," said V K Vijayakumar of Geojit.

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