Market Wrap: Market snaps 3-day losing run; investors richer by ₹2.24 lakh crore in a single day

Indian equity benchmarks the Sensex and the Nifty ended in the green amid mixed global cues on May 26, snapping the losing run of the last three consecutive sessions even as worries over slowing economies and aggressive rate hikes persisted.

Benchmark index the Sensex opened more than 200 points higher at 53,950.84 but slipped in the red soon, falling 324 points. In the afternoon trade, the index rose again and jumped almost 600 points. Finally, the index closed with a gain of 503 points, or 0.94 percent, at 54,252.53 with 24 stocks in the green and six stocks in the red. Nifty50 closed with a gain of 144 points, or 0.90 percent at 16,170.15.

"Markets witnessed healthy short covering towards the closing hours that helped key indices to reverse the three-day losing streak. With the US FOMC minutes out of the way now, the market is more or less getting prepared for the likely rate hikes, and hence we saw strong buying on the F&O expiry day," Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities pointed out.

"While we may see bouts of selling going ahead due to other negative factors like higher inflation, continuous FII selling, and the Russia-Ukraine conflict, relief rallies will still be seen amidst volatility," he added.

Shares of Tata Steel (up 5.27 percent), SBI (up 3.26 percent), HDFC Bank (up 2.96 percent), Axis Bank (up 2.82 percent) and Nestle (up 2.28 percent) ended as the top gainers in the Sensex index.

On the flip side, Sun Pharma (down 1.16 percent), Reliance Industries (down 0.91 percent), HUL (down 0.83 percent), Larsen & Toubro (down 0.67 percent), Dr Reddy's Labs (down 0.21 percent) and Bajaj Finance (down 0.11 percent) ended as the laggards in the Sensex index.

BSE Midcap index outperformed as it closed 1.44 percent higher while the smallcap index ended with a gain of 0.78 percent.

BSE Metal index, with a gain of 3.35 percent, emerged as the top sectoral gainer, followed by the banking index which rose 2.15 percent and the finance index which logged a gain of 1.97 percent.

The overall market capitalisation of BSE-listed firms rose to ₹250.51 lakh crore from ₹248.27 lakh crore, making investors richer by ₹2.24 lakh crore in a single day.

"After the heavy sell-off market showed signs of exhaustion and could bounce for the short to medium-term. The broad market is in the oversold territory and fundamentally valuations are just below the three-year average," Vinod Nair, Head of Research at Geojit Financial Services, observed.

"A key reason for the current correction is selling by FIIs and a reduction in domestic buying. A drop in FIIs selling will be an important reason for the bounce. For this, the actions to be undertaken by FED and RBI in June will be an important factor. Moreover, we should note that the fiscal measure announced by the Indian government to control inflation is positive for the domestic market," Nair added.

Ajit Mishra, VP - Research, Religare Broking pointed out that we are witnessing a respite in line with the global counterparts but participants shouldn’t read much into a single-day rebound.

"The buoyancy in the banking pack is certainly encouraging however Nifty needs a decisive break above 16,400 for any sustained recovery. Keeping in mind the overnight risk and intraday volatility, participants should limit leveraged positions. Investors, on the other hand, can start nibbling as quality stocks are available at a good bargain," said Mishra.

Technicals

Palak Kothari, a research associate with Choice Broking underscored that the Nifty formed the 'Hammer' candlestick pattern on the daily timeframe which indicates reversal movement momentum for an upcoming session.

It has also taken support from the previous horizontal line and showed back movement crossing above 16,410 showing fresh buying in the counter.

"Nifty has given closing above 9-day moving average which indicates a bounce back moment in the counter. However, the momentum indicators MACD and Stochastic were trading with a positive crossover and reversed from the oversold zone on a daily chart which suggests a northward journey in the counter. The index may find strong support around 15,900, while on the upside, 16,300 may act as an immediate hurdle," said Kothari.

Mazhar Mohammad, Founder & Chief Market Strategist, Chartviewindia.in said Nifty made a 'Hammer' kind of formation and usually this kind of formation has bullish connotations provided the index attracts a follow-through buying in the next session.

"As we are presuming a consolidation range for the Nifty between 15,900 and 16,400, after this smart intraday recovery, ideally Nifty should head towards the upper end of the trading range present around 16,400. However, a close below 16,000 may significantly weaken the index with initial targets present around 15,700," said Mohammad.

Disclaimer: The views and recommendations made above are those of individual analysts and not of MintGenie.