Nifty, Sensex stage comeback after 8-day slide as financial stocks fuel rebound from day's lows

The volatility index 'India VIX' surged 6% to 16.

The Indian benchmark indices reversed course and recovered in the last hour of trade to end higher on February 17. With this, the market finally managed to break free of its eight-day losing streak, albeit with minor gains.

The two benchmarks opened at a weaker note in today's session as well, standing on the path to a nine-day losing run, however, last hour buying, especially in financial names like heavyweight HDFC Bank, alongside IndusInd Bank, Bajaj Finserv, and Shriram Finance, pulled the indices out of the red.

Analysts were hoping to see a relief rally in the market as the eight-day fall had pushed the indices into oversold territory. "Whether it happens on today or subsequently is immaterial as a relief rally is overdue. The mood in this pullback rally would be different for different people. Some would use it as an opportunity to sell on strength, some would use it to punt the upward move and some would wait for things to improve and see their portfolio regain lost ground," a fund manager at a domestic brokerage had said.

At the close, the Sensex gained 57.65 points, or 0.08 percent, ending at 75,996.86, while the Nifty rose 30.25 points, or 0.13 percent, to settle at 22,959.50. Of the total shares traded, 1,286 advanced, 2,625 declined, and 135 remained unchanged.

While largecaps and midcaps recouped intraday losses, pressure persisted in smallcap names. The BSE Smallcap index was down 0.6 percent while BSE Midcap moved largely in tandum with the blue-chips, up 0.5 percent.

Despite the slight recovery, concerns circling the markets still persist. The Indian market is facing a raft of headwinds including the relentless selling by FIIs, a weakening rupee, fears of reciprocal US tariffs and worries over a potential multi-front global trade war. Further weakening the sentiment has been India's premium valuations, at a time when earnings growth is witnessing a cyclical slowdown, making it difficult for Indian equities to justify current prices.

While the Nifty 50's valuation dropped below its five-year average today, analysts cautioned that prices still remain expensive in the broader market. The sustained FII selloff in the market has eased the Nifty 50's price-to-earnings (P/E) multiple to 18.9 times one-year forward earnings, lower than the five-year average of 19.4x, according to Bloomberg data.

Sanjeev Prasad, Managing Director and Co- Head at Kotak Institutional Equities stated in an interaction with CNBC-TV18 that while valuations for large-caps are not bad, the problem persists in small-cap and mid-cap stocks, which may see further downside.

Despite recent corrections, Prasad continues to see some froth in the broader market, with railways and metals PSU sectors, in particular, witnessing extreme overvaluation.

Also Read | Market to remain directionless for next few months, warns Kotak Institutional Equities

Analysts at JM Financial see a potential for a stronger bounce-back in the Nifty after its eight-day losing streak, based on their analysis of daily price returns. The firm noted that historically, the Nifty has rarely closed in the negative for eight or more consecutive sessions, and whenever such a streak occurred, it was followed by an upward movement in the index over the next one and three months.

From a technical standpoint, Aditya Gaggar, director of Progressive Shares pegged 22,800 as a strong support for the headline Nifty, after the index managed to defend that level for the third time in recent weeks.  "On the upside, the 23,100 level remains a key immediate resistance. A breakout in either direction is essential for establishing a clear market trend," Gaggar added.

On the sectoral front, the Nifty Pharma index emerged as the top gainer, up 1.3 percent led by names like Glenmark Pharma, Aurobindo Pharma and Granules India. Other indices like Nifty Bank, Nifty Energy, Nifty Infra, Nifty Metal and Nifty PSU Bank rose 0.3-0.8 percent.

In contrast, the Nifty IT, Nifty Media and Nifty FMCG indices logged losses of 0.4-0.7 percent.

Among specific stocks, heavyweights HDFC Bank, Reliance Industries, and IndusInd Bank emerged as the top contributors to the Nifty 50's upmove. Manappuram Finance saw continued short covering, driving its stock up by 9 percent, while Ashok Leyland attracted fresh buying and ended the day with a 5 percent gain.

Glenmark maintained its FY25 guidance despite a weak Q4, propelling a 4 percent spike in its shares. GSK Pharma, on the other hand, emerged as one of the top midcap gainers, surging 20 percent on the back of a healthy Q3 performance.

On the downside, selling pressure continued in stocks like PB Fintech, Supreme Industries, and Varun Beverages.  Bharti Airtel shares closed near the day's low amid reports of Singtel planning to sell its stake. Zen Technologies saw a sharp 20 percent drop following a sharp sequential fall in its Q3 earnings, while Senco Gold fell another 9 percent due to weak Q3 results.

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