Benchmark stock market indices showed a strong rebound on Friday, recovering from the previous day's sharp selloff that was largely driven by the expiry of Futures and Options (F&O) contracts. The S&P BSE Sensex surged by 786.37 points, reaching 79,830.11 by 1:25 pm, while the NSE Nifty50 gained 232.25 points, climbing to 24,146.40. This rally was fueled by key contributors such as Reliance Industries, Bharti Airtel, L&T, and ICICI Bank, which helped to restore investor confidence and lift the indices from their recent lows.
The market regained its footing amid improving investor sentiment, which was partly driven by stock-specific moves and positive news on the domestic front. Despite a generally weaker trend in most Asian markets, the Indian market found support from reports suggesting that the United States might impose less stringent export restrictions on China. This potential easing of trade restrictions boosted Chinese stocks, which in turn had a positive ripple effect on the Indian market, injecting optimism into investor sentiment.
This rebound in stock prices came after a volatile trading day on Thursday when Foreign Portfolio Investors (FPIs) sold off Indian equities worth a significant Rs 11,756 crore, causing heightened market volatility. Analysts at Nuvama Institutional Equities pointed out that although the market had managed to bounce back, it remains in a challenging position. They predicted that the Nifty could oscillate between 23,450 and 25,000 in the near term. If the Nifty moves above 24,400, it could reignite bullish momentum, but a failure to hold above key levels could confirm a bearish trend.
Market experts, including Sameet Chavan from Angel One, highlighted the crucial role of the banking sector in sustaining the ongoing recovery. The performance of the banking stocks is expected to be pivotal for keeping the market rally intact. Chavan pointed out that resistance levels for the Nifty were seen in the 24,050–24,150 range, and the performance of midcap stocks offered some stability to the market during this rally, with midcaps generally outperforming large-cap stocks.
On Friday, several sectors contributed to the strong recovery, with telecom, pharmaceuticals, and consumer goods leading the charge. Bharti Airtel, one of the day's top gainers, surged by 5.32%, hitting Rs 1,643, while pharmaceutical stocks also saw strong gains, with Sun Pharma rising by 3.48% and Cipla climbing by 2.92%. Other notable gainers included infrastructure giant L&T, auto major M&M, Adani Ports, and consumer goods firm Tata Consumer Products, all of which advanced by up to 2%. These sectors were seen as attractive due to their stability in volatile markets, further boosting market sentiment.
In a significant development, the National Stock Exchange (NSE) announced an expansion of its F&O segment, adding 45 new stocks to the list, including prominent names such as Indian Bank, LIC, Adani Green Energy, DMart, and Zomato. This expansion is expected to drive stock-specific action and could result in heightened volatility as the December F&O series kicks off. Prashanth Tapse from Mehta Equities noted that these additions would increase trading activity and could lead to significant movements in the stocks included in the F&O segment.
Despite the impressive recovery, market experts are urging investors to exercise caution. V.K. Vijayakumar from Geojit Financial Services stated that while short-term gains from a "buy on dips" strategy could be limited, such a strategy may still benefit investors who have a medium- to long-term investment horizon. Vijayakumar emphasized that sectors such as financials, IT, capital goods, and telecom remain attractive for potential accumulation, as they offer strong growth prospects in the current market environment.
However, the recent outflows of Foreign Portfolio Investors (FPIs) have added to the uncertainty in the market. Vijayakumar advised investors to adopt a wait-and-watch approach, suggesting that the market remains volatile and that short-term strategies may not offer substantial gains. Instead, investors should focus on stock-specific opportunities that could arise amid the ongoing market fluctuations. With external factors like global trade tensions and domestic market dynamics affecting sentiment, cautious optimism seems to be the most prudent strategy for investors in the current environment.
In summary, while the strong rebound on Friday showcased resilience in the Indian equity market, experts are urging investors to be selective and remain focused on the fundamentals of individual stocks and sectors, especially amid external uncertainties like FPI outflows and global trade developments. A careful and well-thought-out investment strategy could be key to navigating the challenges ahead in a market characterized by volatility and fluctuating investor sentiment.
