Sensex, Nifty rebound sharply as financial stocks gain amid volatility

Benchmark stock market indices closed higher on Tuesday, reversing earlier losses as investors gravitated toward financial stocks that are seen as having cheaper valuations ahead of the closely watched US presidential election.
The NSE Nifty 50 rose 217.95 to end at 24,213.3, while the BSE Sensex gained 694.39 points, closing at 79,476.63. Both benchmarks had fallen by about 0.6% during the session before a strong rally in the final hours of trading.
The increase in financial stocks, which rose nearly 2%, was primarily driven by HDFC Bank, the heaviest stock in both the Nifty and Sensex, which advanced 2.6%.
With the US election outcomes still uncertain, where Democrat Kamala Harris and Republican Donald Trump are virtually tied in opinion polls, investors are remaining cautious.
Analysts suggest a Trump victory could lead to lower corporate tax rates, potentially boosting spending and benefiting various equity sectors in India. On the other hand, a Harris win is perceived as a sign of policy continuity, which is seen as a neutral-to-mildly-positive outcome for Indian stocks.
It may be noted that 11 of the 13 major sectors advanced on the day, with the metals index leading the way, rising 2.8%.
Vinod Nair, Head of Research at Geojit Financial Services, noted, “The domestic market experienced a sharp recovery, reclaiming most of the previous day’s losses amid uncertainty surrounding the likely downgrade in Q2 GDP forecast and closely contested US presidential election. However, the recent rebound in domestic manufacturing activity data, along with the expected revival of consumption in H2, are likely to support market sentiment. Metals led the gains, driven by the anticipation of significant stimulus from China later this week.”
Market sentiment was further buoyed by optimism in Asian and European indices, as Prashanth Tapse, Senior VP (Research) at Mehta Equities Ltd, highlighted: “Markets witnessed a remarkable turnaround towards the closing hours as value buying in banking stocks along with gains in metals and oil & gas stocks aided broad market recovery.”
“Optimism across Asian and European indices ahead of the US election outcome boosted local traders’ confidence, although the medium-term outlook still looks hazy due to skepticism over further rate cuts by the Fed and subdued corporate earnings,” he added.
Meanwhile, VLA Ambala, Co-Founder of Stock Market Today (SMT), added insights on technical analysis, stating, “Over the past sessions, Nifty has corrected by nearly 10%. However, technical analysis suggests that the benchmark index’s RSI has begun to cool off in the recent session. On the technical charts, the current RSI stands at 68, and Nifty is trading below its 20-week EMA. However, the level is still above the 20-month EMA.”
“Based on the current price action, we can expect the two levels to converge soon. In this circumstance, market participants should contemplate implementing a ‘buy on dips’ strategy. However, those with a long-term investment view could benefit more from adopting a ‘sell on rise’ approach,” she added.
“Given the current market situation, value investors should be open to exploring opportunities in sectors such as infrastructure, banking, IT, and PSU, which were hit the most. Considering these developments, we can expect Nifty to gain support between 24,060 and 23,800 and meet resistance around 24,350 to 24,500 levels,” Ambala noted.