The Indian stock market rebounded strongly on Monday, December 23, 2024, after enduring a five-day losing streak. Benchmark indices Sensex and Nifty posted impressive gains, aligning with a
The Indian stock market rebounded strongly on Monday, December 23, 2024, after enduring a five-day losing streak. Benchmark indices Sensex and Nifty posted impressive gains, aligning with a global market rally. This rise is attributed to renewed investor confidence and favorable global cues. Let’s dive into the reasons behind this rebound and its implications for investors.
The rebound in the Indian stock market was influenced by strong performances in global markets. On Friday, December 20, the US markets closed over 1% higher, with the S&P 500 futures advancing. Similarly, Asian markets in South Korea, Japan, and China mirrored the bullish sentiment, setting the stage for Indian markets to follow suit.
Another contributing factor was the weakening of the US dollar, which retreated from its two-year high after lower-than-expected inflation data in the US. This development eased concerns about aggressive monetary tightening by the Federal Reserve, further boosting market sentiment globally.
Stock market analysts see this rebound as a natural pullback after a steep five-day selloff. However, they caution against interpreting it as the beginning of a sustained rally.
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, stated:
“In the short run, there will be market rebounds which may be followed by renewed FII (Foreign Institutional Investor) selling. A sustained rally is possible only when we have indications of a growth revival in the economy, likely in early 2025.”
The reversal in FII flows was a key concern. After net purchases earlier this month, FIIs sold stocks worth ₹15,826 crore last week, reflecting a cautious approach amidst global uncertainties.
According to ICICI Securities, Nifty’s recent decline of over 1,200 points brought the daily stochastic oscillator into oversold territory, indicating a short-term pullback opportunity. However, for a meaningful recovery, Nifty must decisively close above the 24,065 mark, its previous session’s high.
Akshay Chinchalkar, Head of Research at Axis Securities, highlighted the 23,400 mark as a crucial support level, adding that deeply extended downside momentum could lead to a strong rebound.
While the market rally is a welcome development, challenges persist. The continued FII outflows underscore concerns about India’s economic growth and corporate earnings.
Vijayakumar pointed out the relative underperformance of Indian indices compared to the US market, driven by a Q2 GDP slowdown and stagnation in corporate earnings. These factors could weigh on investor sentiment in the medium term.
Market participants are advised to approach this rally cautiously. While short-term gains are likely, the broader market trend will depend on:
Investors should focus on fundamentally strong sectors like banking, steel, and cement, which are backed by favorable policy developments and robust demand prospects.
The stock market’s rebound on December 23 offers a breather after a challenging five-day period. With Sensex and Nifty posting significant gains, investor sentiment has improved, albeit cautiously.
Global factors, like the retreat of the US dollar and strong US corporate earnings, have positively influenced the Indian market. However, domestic challenges, including FII selling and sluggish GDP growth, remain.
As the year comes to a close, the market’s trajectory will depend on a mix of global and domestic factors. For now, investors are advised to remain vigilant, focusing on quality stocks with strong growth prospects.
Disclaimer: This article is for informational purposes only and should not be construed as financial advice. Investors are encouraged to consult with a qualified financial advisor before making any investment decisions.
Source: Business Today
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