Sensex settles 350 pts higher from day's low, Nifty ends near 26,000: 3 key reasons behind market rebound

Stock market today: Sensex, Nifty see value buying. 

The equity benchmarks recovered part of their early losses in a volatile session on Wednesday, supported by buying in IT and banking shares.

The rebound, however, was not enough to lift the market into positive territory, with the Sensex and Nifty ending lower for the fourth straight day.

The Sensex dipped 31.46 points or 0.04 percent to settle at 85,106.81. During the day, it dropped 374.63 points or 0.44 percent to 84,763.64. The Nifty skidded 46.20 points or 0.18 percent to 25,986.

Key factors behind the recovery

1) Buying in IT shares: Information technology stocks firmed up after the rupee slipped to a fresh record low beyond the Rs 90 mark against the US dollar. The weakness in the currency supported sentiment for IT exporters, lifting the Nifty IT index to the top of the sectoral charts. IT firms benefit from the weakening of rupee as most of their revenue is generated in US dollars.

Wipro, TCS, Infosys, other IT stocks rise up to 2% as rupee hits fresh record low: Here's why

2) Value buying: Investors stepped in to pick up beaten-down stocks after four consecutive sessions of decline. Bargain hunting was visible in banking and IT stocks.

Vinod Nair, Head of Research at Geojit Investments, noted "Global markets were mixed as investors are assessing ahead the Fed & ECB monetary policy and currency volatility, while sentiment remained cautious after a jump in Japanese bond yields on expectations of BOJ tightening and increased government spending. The RBI’s policy decision this week will be crucial, especially for banks, as rate cut probability has reduced post the strong Q2 GDP data."

3) Recovery in banks: Banking stocks staged a partial recovery later in the day after witnessing broad-based selling across private and PSU lenders in early trade. Bank Nifty snapped the two day decline to settle higher.

PSU bank shares had weakened after the government clarified it has no proposal to raise the foreign direct investment limit in state-owned banks from 20 percent to 49 percent.

What technical analysts said?

Sudeep Shah, Head - Technical and Derivatives Research at SBI Securities, said "the zone of 25,830–25,800 zone is likely to act as an important support zone for the Index. Any sustained move below 25,800 could drag the index, potentially taking it lower towards 25,650, followed by 25,500. On the upside, the resistance is placed in the zone of 26,050-26,100."

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