Indian equity markets made a sharp recovery during the day on Wednesday; the Sensex went back to the positive side after losing over 1,000 points, while the Nifty 50 rose above the very important level of 25,200, thus ending the deep losses of the early session.
The market recovery occurred after a very turbulent morning, during which time the benchmark indices continued their sell-off for the third straight day on account of negative global factors, foreign fund outflows, and the sudden depreciation of the rupee. At the lowest point of the day, the Sensex had dropped more than 850 points, while the Nifty went below 25,100 for the first time since October, and even touched 25,000 for a moment.
Nonetheless, there was a strong demand from buyers who allowed a big upswing of the selected heavyweight stocks. Among the stocks, Eternal and IndiGo were the biggest gainers, going up by as much as 5%, thus positively contributing to the sharp recovery of the indices. Also, the Nifty Bank index was one of the strong sectors, which went up over 650 points from its day’s low, thus playing a significant role in uplifting the general market mood.
Even though there was a rebound, the overall mood of the market was still cautious. The India VIX, which is a gauge of market volatility, surged by more than 7% which was a signal of great uncertainty. The large part of the sectoral indices kept on being under pressure with the most significant decline in tech, chemicals, consumer durables and midcap stocks while banking and financials were weak already. The defensive sectors had only minor support to offer.
The market players associated the first sell-off with the global and domestic factors. Among these were raised geopolitical tensions tied to the former President of the United States Trump, the falling earnings of the domestic market, the rupee reaching its lowest level, the continuous selling of Foreign Institutional Investors (FIIs), and technicians’ warnings.
Markets were mixed all over the world. While S&P 500 futures were up, on the Asian front, Japan’s Topix and Australia’s ASX 200 were down which showed the continued risk aversion of investors. Futures in Europe pointed to a quiet start as well.
Analysts were saying that the intraday rebound was good but the wider trend was still delicate. A stable recovery will be made possible only through a strong global market, relieved currency pressure, and a stop to the foreign outflows. Until that moment, the traders are advised to be very careful, because volatility is going to be around for a while.
