Nifty and Sensex show signs of recovery after the sharp decline last week. The domestic benchmark indices witnessed a notable uptick of nearly 1 percent in the first half of November 3 session, taking cues from the positive trend in global equities. The surge was fuelled by investor responses to the recent policy decisions and statements from the US Federal Reserve.
While Nifty, Sensex cooled off later in the day, both indices still ended o.7 percent higher. However, market experts believe that this rebound is not yet enough to conclude that indices will stage a pullback rally.
Despite the dovish stance taken by the US Fed, it would be premature to adopt a bullish bias for the medium term, said Arvinder Singh Nanda, Senior Vice President, Master Capital Services. "The current market upswing should be viewed as a temporary respite as the forthcoming release of crucial data such as US non-farm payrolls and Consumer Price Index (CPI) figures will be pivotal in determining a definitive trajectory," Nanda told Moneycontrol.
Global Markets on a high
European markets closed higher on November 2. The Stoxx 600 ended 1.6 percent higher, while all sectors were in positive territory. Stocks maintained gains after the Bank of England announced that it would hold interest rates steady.
Asia markets rose sharply on November 3 as investors took comfort from the Fed decision, while S&P 500 futures inched higher overnight as investors shifted focus from the Fed to the latest batch of corporate earnings reports.
Overnight in the US, markets saw a broad rally as Treasury yields retreated. The S&P 500 notched its best day since April as it rose 1.9 percent, while the Dow saw its best session since June with a 1.7 percent gain. The Nasdaq Composite posted its best day since July, rising about 1.8 percent.
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Where are Nifty, Bank Nifty headed?
"From a technical perspective, key indices Nifty and Bank Nifty have rebounded from crucial support levels. However, Bank Nifty remains relatively weaker than Nifty," Milan Vaishnav, CMT, MSTA, founder of Gemstone Equity Research & Advisory Services, told Moneycontrol.
Nifty bounced back from the original breakout point support zone of 18,850-18,900 levels. The most important resistance are in the 19,300-19,400 zones. "So, Nifty is likely to trade in a range and a directional bias would emerge only after 19,400 is taken out on the upside or 18900 is violated on the downside. Until either of these scenarios plays out, do not expect any trending moves in the markets and they will just consolidate," he added.
As for Bank Nifty, the bounce has halted at 200-DMA, which presently stands at 43,197; this also coincides with the 50-Week MA in close vicinity. "Therefore, we expect both the key indices to stay in a range until 19,400 and 43,500 are taken out on Nifty and Bank Nifty respectively," Vaishnav futher said.
What's next for investors?
Foreign institutional investors (FIIs) have been on a selling spree lately. However, V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services believes that there is a possibility that the FIIs who were sustained sellers in October may turn buyers. "If that happens, short-covering can take markets higher despite the uncertainty surrounding the Israel-Hamas conflict. From the valuation and growth perspective, leading banks provide good buying opportunities. IT can stage a comeback," he said.
Also Read | Sensex, Nifty trim gains, trading firm in green; here's what is pulling share market higher
Analysts believe that long-term investors should continue to invest and ignore this market volatility. Meanwhile, short-term investors or those who have large amounts of money to invest can wait a little and invest in tranches whenever there is a dip or good opportunity.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
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