Sensex, Nifty jump: Bear market bounceback or robust rally? FII flows, global cues to decide future direction

Today's bounce was also supported by the Nifty testing its 200-day moving average (DMA), a pivotal technical level. "Whenever the Nifty hits the 200 DMA, we typically see some bounceback," said Kranthi Bathini, Director of Equity Strategy at WealthMills Securities. "However, whether this rally can be sustained depends on factors such as FII flows, inflation concerns, and global developments."

The IT index led sectoral gains, rising nearly 3 percent, while broader indices such as the BSE Midcap and Smallcap indices rose 1.3 percent and nearly 1 percent, respectively.

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Immediate outlook: Challenges persist

Despite the strong rebound, market experts remain cautious about the immediate outlook. Ajit Mishra, Senior Vice President at Religare Broking, said that while a bounceback after breaching the 200 DMA is typical, "it’s a single-day recovery and not necessarily an indication of a sustained trend."

FII selling has been a persistent headwind, with net outflows of Rs 39,669 crore so far in November and Rs 154,114 crore since October. However, domestic institutional investors (DIIs) have helped stabilise the market with net purchases of Rs 35,837 crore in November and Rs 143,092 crore since October.

Bathini said that sustained FII inflows or even a reduction in selling pressure could act as a strong sentiment booster. He also said that 24,000 is a critical resistance level for the Nifty in the short term, adding that sustaining above this mark would confirm further upside.

Broader themes: India vs China, government capex

Kant and Bathini both said that broader economic and geopolitical factors are influencing the market sentiment. China's recent stimulus measures, while significant, have not yet translated into investor confidence, partly due to concerns over Donald Trump’s re-election and China’s economic outlook, said Bathini. "There’s a pause in fresh money going into China, and some of that may be now flowing into India," he added.

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India’s long-term structural story continues to attract optimism, even as near-term challenges such as delayed government capital expenditure and weak Q2 earnings weigh on sentiment. The government is expected to accelerate capex in the second half of FY25, which could act as a catalyst for growth. "Government capex is yet to pick up, but when it does, it could provide a much-needed boost," Bathini said.

However, Donald Trump’s inward-looking policies could be inflationary, which might complicate India’s recovery. Further, while according to Bathini, a potential US trade war with China is expected to benefit India, Kant said that India may not be able to capture significant gains as we have not established a strong presence in electronics manufacturing yet.

Long-term perspective remains intact

Despite near-term volatility, experts remain bullish on India’s long-term growth trajectory. Anurag Singh of Ansid Capital said that India stands out globally for its 20-year structural growth story. He projected Nifty returns of around 12 percent annually, in line with historical averages.

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