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A 2200-point gain in the Sensex, a 700-point jump in the Nifty, and a 2400-point run-up in the Bank Nifty in three days reflect one of the sharpest moves seen in the market recently. It is rare to see the market react this swiftly to state elections.
Several factors have caused a rapid shift in a short period. The elections’ results are viewed as a precursor to the 2024 general election’s outcome. The results signify a vote of confidence in the current government at the Centre and its growth agenda. Crucially, they are perceived as a rejection of the politics of offering freebies, which has adversely affected the finances of states where governments were elected on the pledge of providing free power, food, or monthly handouts.
Besides politics, the equity market was also under-owned as many traders had exited their positions ahead of election results. The results also saw the return of foreign investors in the cash market. Short-covering was another reason for the frenetic buying seen.
The question now is whether the rally is over or has some steam left. All technical indicators and oscillators indicate the market is in the overbought territory. However, structurally, there is still some room for upward movement.
Buying by foreign traders has just reached the average mark while the client-wise position has shown that traders have booked profit as the market moved higher. Proprietary traders’ data also show booking of long positions after the election result.
The market movement on Wednesday suggests that the market will pause for a while. The next reason for either a rise or fall will be the credit policy meeting. The Monetary Policy Committee (MPC) meeting started today, and the RBI Governor, Shaktikanta Das, will unveil the decision of the six-member MPC on December 8 (Friday). Markets are likely to pause till the next trigger gives them a reason to move. It’s not going to be an easy decision to make, writes my colleague Aparna Iyer, so do read her take to know what to expect.
Investing insights from our research team
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Diversity and inclusion at the workplace have become a legal reality
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Pharma deals show targetted cancer drugs finally living up to the hype
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Technical Picks: Coal India, HDFC AMC, Coromandel International, Engineers India and Aluminium (These are published every trading day before markets open and can be read on the app).
Shishir Asthana Moneycontrol Pro
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