Sensex, Nifty stage a sharp recovery post Tuesday's crash; where is the market headed?

Sensex and Nifty erased nearly half of their Tuesday's losses in the current session amid reports of PM Narendra Modi-led NDA set to form the government, which calmed nerves on the Dalal Street. Sensex ended at 74,382, rising 2303 points and Nifty gained 736 points to a high of 22,620.

The results of Lok Sabha polls were announced on Tuesday.  Sensex fell 4,389 pts to 72,079 and Nifty ended 1379 pts lower at 21,884 in the same session as NDA could win 292 seats out of 543 seats. PM Narendra Modi in his electoral speeches had aimed for over 400 Lok Sabha seats. Investor wealth plunged by Rs 31.09 lakh crore to Rs 394.83 lakh crore on Tuesday against Rs 425.92 lakh crore in the previous session.

However, in the current session, bulls mauled bears with investor wealth surging by Rs 13.14 lakh crore to Rs 407.97 lakh crore on BSE.

All Sensex stocks ended in the green. IndusInd Bank, Tata Steel, M&M, Bajaj Finance, Kotak Bank and Axis Bank led the gains on Sensex, rising up to 7.75%.

“Nifty formed a bullish inside day candle with long lower shadow. It now seems to be consolidating after a sharp fall. Nifty could now head towards 22,858 and 23,180 on the up while 22,319 could offer support in the near term,” said Deepak Jasani - Head Retail Research, HDFC Securities.

India VIX tumbled 29.42% to 18.88, signaling a fall in the market volatility in the current session.

Vinod Nair, Head of Research, Geojit Financial Services said, "Indian market exhibited a spirited recovery driven by broad based buying across various sectors as political stability appears assured. However, attention will remain on the formation of the government and the forthcoming RBI policy meeting. The market does not expect any change in RBI’s policy stance given persistent high food inflation, and an expectation of an increase in government spending, which has led to a notable traction in FMCG stocks."

Ajit Mishra, SVP, Research, Religare Broking said, "With the major event now behind us, we anticipate a gradual reduction in volatility. The index rebound is encouraging, but sustaining above the 22,600 level is crucial for a move towards 23,000. Conversely, the 21,800-22,000 range should provide support in case of profit-taking. We continue to favor defensive sectors such as FMCG, IT, and pharma, and recommend being selective in other sectors."

As many as 117 stocks hit their 52-week highs today. On the other hand, 110 shares hit their 52-week lows on Wednesday.

Market breadth was green in the current session.

Of 3,918 stocks, 2597 stocks ended in the green. Around 1221 stocks ended in the red while 100 stocks remained unchanged.

All 19 BSE sectoral indices ended in the green today.  Consumer durables, metals, healthcare, banking and auto shares led the gains on Dalal Street today. BSE consumer durables, metals, healthcare, banking and auto shares indices rose 1907 points, 1635 pts, 1185 pts and 2252 pts  and 2369 pts, respectively.

Around 16 stocks hit their higher circuits. On the other hand, 4 shares hit their lower circuit limits. BSE midcap index rose 1798 pts to 42,586, signaling bullishness in the broader market. On the BSE, small cap stocks index gained 1319 pts to 46,277 level.

Bank Nifty too surged 2126 pts to close at 49,054.

Ashwin Ramani, Derivatives & Technical Analyst, SAMCO Securities said, "Bank Nifty recovered sharply. The 47,000, 47,500 & 48,000 Strikes saw call writers (Bears) exiting and (additional) put writing, leading to the strong recovery in the Index. The call writers (Bears) have sizeable positions at the 49,500 Strike and the option activity at this strike will provide cues about Bank Nifty's future direction."