Sensex and Nifty Rebound: Key Insights from Last Week’s Slump and IT Rally
After a tumultuous week that saw significant declines in the Indian equity markets, the BSE Sensex and NSE Nifty have rebounded, driven primarily by a rally in IT stocks and positive global cues. As of October 7, 2024, the Sensex climbed 292.29 points to reach 81,980.74, while the Nifty increased by 54.55 points to settle at 25,069.15.
Recap of Last Week’s Slump
Last week was challenging for investors, with the Sensex plummeting nearly 4.5%—its worst performance in over two years—due to escalating tensions in the Middle East and substantial foreign institutional investor (FII) outflows. The indices experienced a sharp decline, with the Sensex losing approximately 3,883 points and the Nifty dropping around 1,164 points during this period. Concerns about geopolitical instability and its impact on global markets weighed heavily on investor sentiment.
Factors Behind the Rebound
- IT Stock Surge:
- The recent rally in IT stocks has been a significant driver of the market rebound. Major players like Infosys, HCL Technologies, and Tata Consultancy Services have seen substantial gains, contributing positively to both indices. The Nifty IT index rose by 0.80%, reflecting renewed investor confidence in this sector.
- Positive Global Cues:
- Strong U.S. labor market data released on Friday helped ease recession fears, boosting global market sentiment. The September non-farm payroll numbers showed an unexpected addition of over 254,000 jobs, which has been interpreted as a sign of economic resilience.
- Domestic Institutional Support:
- While foreign investors offloaded equities worth approximately ₹9,897 crore last week, domestic institutional investors (DIIs) stepped up their buying, purchasing equities worth about ₹8,905 crore. This shift indicates a willingness among local investors to capitalize on lower valuations following the market correction.
Market Sentiment and Expert Insights
Dr. V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services, emphasized that despite geopolitical tensions, global stock markets have shown resilience due to strong economic fundamentals in the U.S.:
“The combination of a strong economy and declining inflation is a big positive for equity markets.”
He also noted that the recent correction could present a buying opportunity for long-term investors as many quality stocks are now fairly valued.
Sector Performance
- Gainers: Alongside IT stocks, other sectors such as financial services also performed well, with notable gains in companies like ICICI Bank and Kotak Mahindra Bank.
- Laggers: Conversely, sectors such as media and metals faced declines, with Nifty Media dropping by 1.41%.
Conclusion
The rebound of the Sensex and Nifty following last week’s slump highlights the volatility inherent in equity markets but also underscores opportunities for savvy investors. With strong performances from IT stocks and supportive domestic buying amid positive global signals, there is cautious optimism as we move forward.As we approach the upcoming trading sessions, market participants will be closely watching geopolitical developments and economic indicators to gauge their impact on future market movements. The resilience shown by Indian markets amidst external pressures reflects a robust underlying economy that continues to attract both domestic and international interest.