Sensex, Nifty 50 rebound a day after stock market crash. Experts unveil this investment strategy amid volatility
Stock market today: A day after suffering strong losses of about 1.5 per cent, Indian stock market benchmarks- the Sensex and the Nifty 50 - jumped by almost a per cent each intraday on Friday, November 29.
Stock market today: A day after suffering strong losses of about 1.5 per cent, Indian stock market benchmarks- the Sensex and the Nifty 50 - jumped by almost a per cent each intraday on Friday, November 29.
The Sensex and the Nifty 50 rose over 1 per cent to the levels of 79,923.90 and 24,188.45, respectively, during the session. Eventually, the Sensex closed 759 points, or 0.96 per cent, higher at 79,802.79, while the Nifty 50 settled with a gain of 217 points, or 0.91 per cent, at 24,131.10.
The BSE Midcap and Smallcap indices climbed 0.31 per cent and 0.76 per cent, respectively. BSE-listed firms' overall market capitalisation (m-cap) rose to nearly ₹446.5 lakh crore from ₹443 lakh crore in the previous session, making investors richer by about ₹3.5 lakh crore in a day.
Experts expect the market to remain volatile in the short term amid persisting headwinds.
Plethora of market headwinds
The recent crash in the Indian stock market could be attributed to selling by foreign institution investors (FIIs) amid weak Q2 earnings and heightened geopolitical tensions.
“The Nifty 50 fell 6 per cent in October after witnessing a bull run of about 44-45 months without any significant correction. This fall was led by FIIs pulling out because of the Indian stock market's relatively high valuations compared to its global markets. Moreover, there was a conspicuous slowdown in urban consumption, and government spending was slow in the first half of the current financial year (H1FY25) due to elections and heat waves,” Kunal Mehta, Associate Director at Equirus, observed.
"Selling by FIIs is the primary reason behind the recent market downtrend. This has to do with the strengthening of the dollar as the return of Donald Trump as the US President has raised expectations that the US economy and its currency will be strong. This has created some nervousness for foreign investors," said G. Chokkalingam, the founder and head of research at Equinomics Research Private Ltd.
The Trump factor is also a factor that has infused nervousness among market participants.
"The market has not completely discounted the Trump factor, and the impact on India remains uncertain. At this point, it is unclear whether Trump will favour India or if certain sectors might face setbacks," said Chokkalingam.
Experts find the FII trend perplexing, especially after the recent few days of buying.
“A perplexing market action in recent days is the inexplicable volatility in FII activity. A few days of buying followed by yesterday’s massive selling of ₹11,756 crore is difficult to explain. What are the factors contributing to this apparently irrational activity? Is this a one-off? Or is there more to come? Answers to these questions will be available in the coming days,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Geopolitical tensions, weak corporate earnings and uncertainty about the US interest rate trajectory are additional headwinds for the market.
Investment strategy amid volatility
The domestic market is currently in a corrective phase, which may prompt investors to book profits on every rise. However, experts recommend focusing on long-term opportunities and buying during dips.
"The market is going down due to earnings slowdown and fear of trade tariffs, but I would not say this is a 'sell-on-rise' market. Investors can get some value opportunities in this market," said Amar Ambani, Executive Director at YES SECURITIES.
Ambani believes the earnings slowdown could be partly addressed in Q4 due to increased government spending and recovery in urban consumption.
According to Mehta of Equirus, investors should focus on sectors catering to the rural economy, as good monsoons and subsidies have boosted rural incomes. Also, pharma + healthcare (hospitals and diagnostics) will do well. Also, with deposit growth picking up, large banks will also do well, said Mehta.
"Investors should wait and watch. A buy-on-dips strategy may not yield short-term gains in this market. However, this strategy can be applied by investors with a medium to long-term time horizon. Large caps in financials, IT, capital goods and telecom are ideal for medium- to long-term accumulation," said Vijayakumar.
Technical outlook for Nifty 50
Amol Athawale, VP of technical research at Kotak Securities, said the current market texture is volatile and non-directional, so level-based trading would be the ideal strategy.
"In the near future, 20-day SMA, or 24,000, would act as a trend decider level. if it sustains above the same, then it could bounce back to 24,150-24,175. On the other side, below 24,000, chances of hitting 23,850 and 23,750 would turn bright," said Athawale.
According to Mandar Bhojane, an equity research analyst at Choice Broking, a rebound from the 0.382 Fibonacci retracement level on Friday and its ability to sustain above 24,000 signals emerging price stability.
Bhojane sees immediate support levels at 23,800 and 23,680, which align with strong Fibonacci zones. If supported by price action, these levels could act as potential reversal points. On the other hand, 24,350 serves as a key hurdle. A sustained move above this level could propel the index towards 24,800 and 25,000, unlocking significant upside potential.
"Momentum indicators add to the positive outlook, with the RSI trending upward at 48.52, indicating improving momentum. Furthermore, the price respects the 200 EMA at 23,570, reinforcing the support structure. The alignment of these indicators suggests a robust base for potential recovery," said Bhojane.
"Open Interest (OI) analysis reveals the highest OI on the call side at 24,300 and 24,500 strike prices, marking significant resistance zones. On the put side, concentrations at 24,000 and 23,500 highlight critical support levels," Bhojane said.
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Disclaimer: The views and recommendations above are those of individual analysts, experts, and brokerage firms, not Mint. We advise investors to consult certified experts before making any investment decisions.
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