Sensex surges 2,700 pts, Nifty up 3.5% in three days: Will markets take a breather or is there more steam left in this rally?

Sensex surges 2,700 pts, Nifty up 3.5% in three days: Will markets take a breather or is there more steam left in this rally?

• Markets approach all-time highs despite Middle East tensions
• Nifty faces resistance at 24,000–24,150, support at 23,000–22,900
• Banking, financials, and capital goods stocks show strength

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Will benchmark indices take a breather after a non-stop rally this week so far or is there more steam left? This question is dominating investors' mind amid the ongoing US-Iran war, which battered the markets until last week. Sensex rose over 2,700 points this week while Nifty climbed 3.5% this week.

Analysts have suggested investment strategies as markets are taking tentative steps towards all-time highs even as multiple tailwinds persist amid the escalating Middle East tensions. These tailwinds include higher crude prices, which might lead to higher inflation.

"Moderating valuations, now close to long-term averages, along with an expected earnings growth recovery of 15–17% in FY27, are setting a constructive outlook for equity markets despite ongoing global uncertainties. The report notes that while markets remained range-bound in February due to factors such as geopolitical tensions, FII outflows and currency volatility, improving domestic macros, strong government capex momentum and a pickup in credit and investment cycles are expected to support earnings recovery going ahead. It further highlights that large caps are better placed from a risk-reward perspective given relatively attractive valuations and earnings stability, while selective opportunities continue to emerge in mid and small caps with a focus on bottom-up stock selection," said Tata Mutual Fund.

One brokerage said Nifty might show a directional move in the 24,000-24,150 zone.

"The index formed a spinning top candle, reflecting clear indecisiveness as markets await the US Fed’s FOMC policy decision. Despite the pause, the broader tone remains cautious, with traders looking for direction from global cues. Going ahead, from a positional perspective, the 24,000–24,150 zone is likely to act as a strong resistance area, and the 23,000–22,900 range remains a crucial support band that bulls need to defend to maintain stability in the market," said Axis Securities.

"Expect 23,700 region to pose a challenge, a direct rise past which is required for playing the second objective of 23,990. The 23,550 region will have to hold early slippages to prepare Nifty for an early launch higher. Slippage past the same, will have the potential to push Nifty into 23,300-130 region," said Anand James, Chief Market Strategist, Geojit Investments Limited.

We expect markets to gain momentum as foreign investors begin unwinding their short positions in index futures, said Devarsh Vakil, Head of Prime Research at HDFC Securities.

Traders may continue to focus on banking, financials, and capital goods stocks, which are showing relative strength. However, with indices approaching key resistance levels, a stock-specific approach with disciplined risk management remains advisable, said Aakash Shah, Technical Research Analyst at Choice Equity Broking Private Limited.

Despite the uncertainty regarding the war markets have staged a bounce back. One factor that enabled this bounce back is crude remaining around the $ 102 level and fears of spiking above $120 not materialising. The near-term scenario will be one of markets responding mildly positively to some good news and negatively to bad news, said VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited.

"The Indian stock market closed on a positive note today, with the Nifty 50 finishing at 23,777.80, gaining 197 points or 0.83%. The session was characterized by a range-bound trade, as the index opened at 23,632.90, reached a high of 23,862.25, and dipped to a low of 23,618.45 before settling higher. Similarly, the BSE Sensex rose sharply, closing up over 700 points, reflecting strong investor sentiment.

"The rally in the stock market was bolstered by several factors, including the positive momentum from global cues and a favorable domestic outlook. Reports indicated that the Nifty50 opened above 23,790, and the sustained trend was attributed to IT stocks' resurgence. Additionally, crude oil prices remained stable around $102, alleviating concerns about potential spikes that could impact inflation and economic growth," said Gaurav Garg, Research Analyst Lemonn Markets Desk.