Stock Market Crash – Indian Stock Market Surges ₹3 Lakh Crore: Experts Discuss Future Volatility
Stock Market Crash – The Indian stock market made a remarkable recovery on Friday, November 29, following a significant decline of approximately 1.5% in the previous trading session. The Sensex and Nifty 50, two of India’s major stock market indices, both surged by about 1% during the intraday session, climbing to levels of 79,848.76 and 24,144.45, respectively.
Market Capitalization Surges by ₹3 Lakh Crore
In addition to the rise in indices, the broader market also showed strength. The BSE Midcap and Smallcap indices saw gains of nearly half a percent. Overall, the market capitalization of BSE-listed companies increased to approximately ₹446 lakh crore, up from ₹443 lakh crore in the previous session, making investors richer by ₹3 lakh crore in just one day.
Despite this recovery, experts caution that the market may remain volatile in the short term, given the prevailing challenges. The recent decline in the Indian stock market has been attributed to foreign institutional investors (FIIs) pulling out, amid weak Q2 earnings and rising geopolitical tensions.
FIIs’ Selling Behind Market Decline
According to Kunal Mehta, Associate Director at Equirus, the Nifty 50 saw a 6% drop in October, following a bull run of nearly 44-45 months without any significant correction. The decline was largely driven by FIIs, who were concerned about the relatively high valuations of the Indian stock market compared to global markets. Additionally, urban consumption showed a slowdown, and government spending was slower in the first half of the current fiscal year (H1FY25), partly due to the ongoing elections and heatwaves.
G. Chokkalingam, founder and head of research at Equinomics Research Private Ltd, noted that the recent selling by FIIs is tied to the strengthening dollar and the potential return of Donald Trump as U.S. President. Trump’s potential re-election has fueled expectations of a stronger U.S. economy and currency, making foreign investors nervous. This situation adds to the uncertainty around India’s market, with questions regarding Trump’s policies towards India.
Uncertainty Surrounding the Trump Factor
“The market has not fully priced in the Trump factor,” said Chokkalingam. “There is still uncertainty about how the U.S. political landscape could affect India, particularly in relation to specific sectors.”
The recent volatility in the behavior of foreign institutional investors (FIIs) has raised some perplexing questions. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, commented on the erratic FII activity, with a few days of buying followed by a massive sell-off of ₹11,756 crore on the previous day. “The reasons behind this sudden selling are difficult to explain,” he added. Vijayakumar believes that geopolitical tensions, weak corporate earnings, and uncertainty about the U.S. interest rate trajectory are major headwinds for the market.
Investment Strategy Amid Market Volatility
While the Indian market is currently in a corrective phase, experts suggest that investors focus on long-term opportunities rather than short-term speculation. Amar Ambani, Executive Director at YES Securities, recommends that investors buy during dips, as this strategy may present value opportunities despite the broader market slowdown.
Ambani believes that the earnings slowdown could improve in the Q4, driven by increased government spending and a potential recovery in urban consumption. Kunal Mehta of Equirus advises investors to focus on sectors that cater to the rural economy, as good monsoons and subsidies have boosted rural incomes. He also sees potential in pharma, healthcare, and large banks, which are expected to perform well as deposit growth picks up.
Technical Outlook for Nifty 50
From a technical perspective, Amol Athawale, VP of technical research at Kotak Securities, explained that the current market is volatile and non-directional. He recommends level-based trading as the ideal strategy. “In the near future, the 20-day simple moving average (SMA) at 24,000 will act as a key trend-decider level. If the Nifty sustains above this level, it could rebound to 24,150-24,175. On the downside, if it falls below 24,000, there are chances of hitting 23,850 and 23,750,” said Athawale.
Support and Resistance Levels for Nifty 50
Mandar Bhojane, an equity research analyst at Choice Broking, emphasized that the Fibonacci retracement level at 0.382 on Friday shows price stability, suggesting that the market might be poised for a recovery. Immediate support levels are seen at 23,800 and 23,680, which align with strong Fibonacci zones. “If these levels hold, they could act as potential reversal points,” Bhojane explained. On the flip side, 24,350 is identified as a significant resistance level, and a sustained move above this could push the Nifty towards 24,800 and even 25,000, unlocking substantial upside potential.
Momentum indicators also support the positive outlook for Nifty, with the Relative Strength Index (RSI) trending upward at 48.52, indicating improving momentum. Furthermore, the price is respecting the 200-day exponential moving average (EMA) at 23,570, reinforcing the support structure for a potential rebound.
Open Interest Analysis for Nifty 50
Open Interest (OI) data reveals that the highest OI on the call side is at 24,300 and 24,500 strike prices, signaling significant resistance. On the put side, the key support levels are found at 24,000 and 23,500, according to Bhojane.
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