Market sees sharpest swing in 6 months before closing in green | Stock Market News

India’s stock benchmarks staged the sharpest intra-day recovery in six months on Friday, supported by foreign investors snapping up large-cap stocks. With bulls in pole position, analysts expect the Nifty to trend up early next week to cross the 25000-mark, where it’s expected to face stiff resistance.

The last time the Nifty and Sensex swung through a larger range was on 5 June, a day after the Lok Sabha election results showed a third term for the National Democratic Alliance government.

The Nifty closed up 0.9% at 24768.30 while the Sensex closed up 1.04% at 82133.12, as foreign portfolio investors (FPIs) net purchased shares worth a provisional ₹2335.32 crore, even as DIIs net sold a provisional ₹732.2 crore worth of shares. Analysts anticipate an extended rally on Monday as both indices closed near the day’s highs.

Before the recovery, however, the Nifty gyrated 611.50 points or 2.5% between the day’s low of 24180.80 and the high of 24792.30. This was the sharpest swing since 5 June when the bellwether swung 878 points or 4%. From a low of 21884.5 on 4 June, the Nifty rose 20% to hit a life-high of 26277.35 on 27 September.

Sensex swung 2131.10 points

On Friday, the Sensex swung 2131.10 points, or 2.66%, between the day’s low of 80082.82 and high of 82213.92, also the highest since 5 June, when it oscillated 2655 points or 3.69% between low and high. From the low of 70234 on 4 June, the index rallied 22% to a record 85978 on 27 September.

“It could be that markets trend slightly higher, supported by institutional buying and thinner participation by FPIs,” said Andrew Holland, CEO, Avendus Capital Public Markets Alternate Strategies. Thinner volumes mean relatively low amounts of buying can move the market sharply.

The market’s recent decline from highs in late September was led by FPI selling, but was cushioned by domestic institutional investor led buying . Of late, FPIs have turned buyers.

Since October through 12 December, net selling by FIIs has totalled ₹92,863 crore, while the net buying by DIIs stood at ₹1.57 trillion. Though the DII buying exceeded the net selling by foreign investors, in the absence of FPI buying in the cash market, the huge supply through initial public offerings and qualified institutional placements could not be absorbed, dragging down the markets.

For example,  just five IPOs—including Hyundai Motor India, Swiggy, NTPC Green, Waaree Energies and Afcons Infra—and one QIP of Zomato—across October and November bridged the entire difference of ₹64280 crore between the DII buying and FII selling between October and 12 December. To be sure, FIIs have been net buyers of ₹22766 crore in the month through 12 December, per NSDL data, after heavy selling in October-November spurred by disappointing Q2 earnings.

Market bounce

The Nifty plumbed 3014 points or 11.5% from its life high of 26277.35 on 27 September through a low of  23263.15 on 21 November, while the Sensex plunged 10.67% or 9175 points from its life high of 85978.25 on 27 September to 76802 on 21 November. From there, markets have bounced on retail buying and resumption of FPI inflows betting on an improvement in corporate earnings.

Rohit Srivastava, founder, IndiaCharts, like Avendus’ Holland expects some more steam to drive the rally. He expects the Nifty to test 25130 , which is 1.4% away from Friday’s close.

When markets fall as they have done in the three weeks through 21 November, they tend to retrace up to certain technical levels, known as Fibonacci retracement levels which indicate resistance and supports. 

For example, Nifty fell 3,014 points between 27 September and 21 November. The retracement levels are 23.6% , 38.2% , 50% and 61.8% before it resumes its original directional move.

Retracement and resistance

The Nifty has to test the 61.8% retracement after rallying 6.5% from the 21 November low to Friday closing. This stands at 25126. If it sustains above this level for a few days, it can have a shy at its life high of 26277.35 of 27 September.

“A 61.8% retracement is where I feel Nifty will meet stiff resistance ,” added Srivastava.

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Friday’s Nifty index movers included Bharti Airtel, ICICI Bank, HDFC Bank, ITC and Reliance Industries, which together accounted for three fifths of the Nifty’s 219.6 point gain.

A rally in markets, as per Srivastava, could be supported by heavyweight Reliance, which has seen the highest build-up in short futures positions in over 18 years. The aggregate shorts in Reliance stand at 197.84 million shares against 241 million shares seen on 8 May 2006. A rally could come on the back of short-covering in Reliance, he added.