Sensex, Nifty rebound sharply; can the recovery sustain?

Indian equity benchmarks staged a recovery on Thursday, with gains across banks, financials, consumer, IT, automobile, media and realty stocks. The 30-share BSE Sensex pack advanced 628.04 points or 0.82 per cent to settle at 77,537.72, while the broader NSE Nifty50 index climbed 153.55 points or 0.64 per cent to close at 24,231.85.

The broader market also remained firm as Nifty Smallcap 100 gained 0.68 per cent and Nifty Midcap100 rose 0.41 per cent.

The rebound also lifted investor wealth. The combined market capitalisation (m-cap) of BSE-listed companies increased by around Rs 2.77 lakh crore during the session to Rs 491.48 lakh crore, from Rs 488.70 lakh crore in the previous session.

Among the top Sensex gainers were HDFC Bank Ltd, ICICI Bank Ltd, Bharti Airtel Ltd, Reliance Industries Ltd (RIL), Eternal Ltd, Axis Bank Ltd, Larsen & Toubro Ltd (L&T), Kotak Mahindra Bank Ltd, Infosys Ltd, Bajaj Finance Ltd and ITC Ltd.

What drove the recovery?

Ajit Mishra – SVP (Research) at Religare Broking, said, "Investor sentiment improved following stabilisation in global bond markets after the US Treasury announced measures to increase buybacks of long-duration debt, easing concerns over rising global yields. A stronger rupee and short covering following the recent correction further supported the recovery. However, Brent crude remained elevated near $94 per barrel amid continuing geopolitical tensions and uncertainty surrounding the Strait of Hormuz, keeping inflation and external-sector risks on investors' radar."

Ankur Punj, Managing Director at Equirus Wealth, noted, "Markets rebounded sharply, aided by recovery in other key Asian indices as investors resorted to short-covering after the recent slump. With US bond yields moderating and the rupee appreciating mildly, markets witnessed risk on sentiment, although the undertone remains cautious due to the lingering West Asia conflict and volatile crude oil prices."

Ponmudi R, CEO of Enrich Money, attributed the rise to easing pressure in global bond markets and resilient domestic buying outweighing persistent geopolitical concerns. "The US Treasury's expanded bond-buyback programme, aimed at easing upward pressure on long-term borrowing costs, helped stabilise global bond markets and improve near-term risk sentiment, supporting gains across Asian equities and lifting domestic financial and information technology stocks," he added.

Nifty outlook

Rupak De, Senior Technical Analyst at LKP Securities, stated, "Nifty50 staged a recovery after finding support at a critical level. In fact, the index closed meaningfully higher than the previous close for the first time in the last thirteen sessions. On the daily timeframe, it has reclaimed the 50EMA, indicating an improvement in the short-term trend. Overall, the short-term sentiment looks positive, and Nifty is expected to move towards higher levels. On the higher end, resistance is seen at 24,350/24,500, while on the lower end, support is placed at 24,150."