The equity benchmark indices bounced back from early losses to trade higher on Thursday, driven by value buying following four consecutive sessions of decline.
The Sensex started on a weak note, falling by 156.83 points to 84,949.98, while the Nifty dipped 47 points to 25,938.95. However, both indices later turned the tide. The Sensex rose by 369.80 points, or 0.43 percent, reaching 85,476.62, and the broader Nifty climbed to 26,096.25, up 110.25 points, or 0.42 percent.
Key factors behind the market rebound:
1) Global cues: Asian markets showed mixed results, with South Korea’s Kospi trending lower, while Japan’s Nikkei 225 and Hong Kong’s Hang Seng saw gains. US indices finished in the green overnight, contributing to a more stable outlook for domestic equities.
2) Value buying: Investors found opportunities to accumulate stocks at lower prices after the recent downturn. There was notable buying interest in IT, metal, and auto shares, which provided support to the broader market.
3) IT shares gain: The weakness of the rupee and the anticipation of a Federal Reserve rate cut next week fueled momentum in IT stocks. The rupee slipped 28 paise to an all-time low of 90.43 against the US dollar in the early session, largely due to ongoing foreign fund outflows. The depreciating rupee enhanced sentiment for IT exporters, who earn a significant share of their revenue in dollars. Additionally, a rate cut could stimulate growth in the world's largest economy, potentially increasing client spending.
Anticipation is building around the RBI's upcoming decision on Friday, as strong economic growth and a declining currency spark discussions on the necessity of a rate cut. Investors are particularly keen to understand the Reserve Bank of India's policy direction, according to Kranthi Bathini, director of equity strategy at Wealthmills Securities.
If a rate reduction occurs, we could see an uptick in rate-sensitive stocks. However, sustainable growth will largely depend on the earnings from the December quarter and developments in the U.S.-India trade deal, Bathini noted. He also mentioned that accommodating stances from both the RBI and the Federal Reserve could ignite a brief "Santa rally" in the markets.
Deepak Agrawal from Kotak Mahindra AMC anticipates that the RBI will increase its FY26 GDP growth forecast to above 6.8 percent.
Technical view
From a technical standpoint, Anand James, Chief Market Strategist at Geojit Financial Services, observed that the Nifty's recovery appears to have stalled around the 26,000 level. "We might need a period of consolidation before targeting 26,111 or breaking above 26,200," he remarked. "However, a drop below 25,935 could signal a return to the downside."
Conclusion
Please note that these insights and investment recommendations reflect the opinions of the experts and do not necessarily represent the views of Moneycontrol or its management. It's advisable to consult certified experts before making any investment decisions.
FAQs
1. Why did the Sensex and Nifty recover after early losses?
Ans: The indices rebounded due to value buying, positive global cues, and strong interest in sectors like IT, metals, and auto after four sessions of decline.
2. Which sectors contributed most to the market recovery?
Ans: IT, metal, and auto stocks led the rebound, with IT particularly benefiting from a weak rupee and expectations of a U.S. Federal Reserve rate cut.
3. How did global markets influence Indian equities?
Ans: Asian markets showed mixed trends, and U.S. indices closed higher overnight. These stable global cues supported investor sentiment in Indian markets.
4. Why is the rupee's weakness helping IT stocks?
Ans: A weaker rupee boosts revenues for IT exporters since a major portion of their income comes in U.S. dollars, making IT stocks more attractive.
5. What impact could the upcoming RBI decision have on the markets?
Ans: The RBI’s policy decision may influence rate-sensitive stocks. A potential rate cut could boost sentiment, though long-term movement will depend on earnings and global developments.
6. What is expected from the RBI's GDP growth forecast?
Ans: Experts, including Kotak Mahindra AMC’s Deepak Agrawal, expect the RBI to raise FY26 GDP growth projections above 6.8%.
7. What is the technical outlook for the Nifty?
Ans: Analysts note that Nifty’s recovery faces resistance near 26,000–26,200. A fall below 25,935 could signal a downside move, while consolidation may be needed before further gains.
8. What is a “Santa rally” and is it expected?
Ans: A Santa rally refers to a late-December market surge. Analysts believe dovish signals from both RBI and the U.S. Federal Reserve could trigger a short-term rally.
9. Should investors make decisions based on short-term market movements?
Ans: It’s advisable to stay cautious. Market views from analysts reflect their opinions, and investors should consult certified financial experts before making decisions.
10. What key factors should investors watch in the coming days?
Ans: Important indicators include:
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RBI’s policy outcome
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U.S. Federal Reserve’s stance
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December-quarter earnings
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U.S.–India trade negotiations
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Currency movement (INR vs USD)
