Indian markets made a strong comeback on Tuesday, led by a swift recovery in index majors. Sentiment was upbeat from the beginning in reaction to the FM’s hint on a lower tax regime. The markets gained real momentum in the latter half and closed around the day’s high, indicating short covering of derivatives positions ahead of monthly expiry.
It was, in fact, a remarkable day for traders (especially bulls) as the market not only saw respite after a recent corrective move, but also a stupendous intraday recovery to reclaim the 8000 mark by a fair margin. As a result, the Nifty posted a strong close by adding nearly one-and-a-half percent to its previous day’s close and closed the day at 8032.85, up 124.60 points. The Sensex also surged by 406.34 points to close the day at 26213.44.
Looking at today’s spectacular bounce, “our recent stance of avoiding initiating fresh shorts in the market has certainly played out well for us. Now, 7900 has become a sacrosanct level in the near term for the Nifty. For the forthcoming session, the hourly ’89 EMA’ level of 8060 would be seen as important resistance level as a sustainable move beyond this may extend this bounce back rally towards 8109–8127 levels. On the flipside, 8010–7970 are likely to act as intraday supports. Further, traders should continue to look for potential long trades in individual stocks similar to what we witnessed during today’s session,” said Sameet Chavan, Chief analyst-Technical & Derivatives, Angel Broking.
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Jayant Manglik, President, Retail Distribution, Religare Securities Ltd, said that clearly, the sudden surge caught participants by surprise and triggered short covering. But, it’s too early to call reversal on a single day’s move and “we suggest maintaining a cautious approach ahead also. Thursday’s derivatives expiry will be more volatile than it has been for several months.”