Markets bounce back sharply on bargain hunting; Sensex rises 1,961 points

Benchmarks register third-best day of this year

Indian equity benchmarks rallied on Friday to post their third-best single-day gains in 2024 as investors looked beyond the rout in Adani group stocks and showed renewed buying interest after key indices entered correction territory.

 

A bit of short covering was also cited for the rally on a day when institutional buying was moderate. The Sensex ended the session at 79,117, a gain of 1,961 points, or 2.5 per cent. Nifty, on the other hand, ended the session at 23,907, a gain of 557 points, or 2.4 per cent. Both the indices snapped their losing streak after two weeks. During the week, Sensex gained 1.98 per cent, and Nifty rose 1.6 per cent. BSE-listed firms' market capitalisation rose by Rs 7.3 trillion and stood at Rs 432 trillion.

 

The best and the second-best single-day gains so far in 2024 happened on June 3 and June 5, respectively. Adani group stocks recovered, and most of the shares ended in the green. The group’s market capitalisation, however, declined by Rs 10,383 crore.

 

There was a renewed buying interest after the benchmark and broader indices entered the correction territory. Based on Thursday's close, the Nifty has corrected 11 per cent from the all-time high it hit in late September, while the Nifty midcap 100 declined 10.7 per cent, and the Nifty smallcap 100 fell 10.4 per cent.

 

"Before the newsflow on Thursday, the market was trying to bounce back. It was slipping into oversold territory, and a 2-3 per cent gain was due. Fundamentally, nothing has changed,” said Andrew Holland, CEO of Avendus Capital Public Markets Alternate Strategies. 

                            

Foreign portfolio investors (FPIs) on Friday were net sellers to the tune of Rs 1,278 crore, and domestic institutions were net buyers worth Rs 1,722 crore.

 

"There were a lot of short positions because investors felt the impact on markets would be adverse, like when Hindenburg Research's allegations surfaced. But when markets started getting bought into, it triggered short covering. However, the bounceback does not have strong legs to stand on. Because if it is short covering today, there will be new people to short the market, especially when FPIs continue to be sellers. Investors will be more cautious on Monday. The ebullience is unlikely to continue," said UR Bhat, director and chief investment strategist of Alphaniti Fintech.

 

Indian equity markets saw sustained selling since they hit their recent highs on account of FPI selling and weak corporate results.

 

The market breadth was strong, with 2,396 stocks advancing and 1,539 declining. All the Sensex constituents gained. Reliance Industries, which rose 3.5 per cent, was the biggest contributor to Sensex gains, followed by Infosys, which rose 3.8 per cent.

 

"Considering the headwinds the market is facing, a sustained recovery is unlikely. The strength in the broader market should not be confused with the fundamental strength of the segment. The strength of the broader market, particularly the midcaps, is due to liquidity and not fundamentals. Fundamental strength and safety are in largecaps,” said V K Vijayakumar, chief investment strategist, Geojit Financial Services.

 

Meanwhile, the rupee recovered from its all-time low level and appreciated 6 paise to close at 84.44 against the US dollar on Friday, supported by positive domestic equities. Forex traders said the rupee is trading in a narrow range as the US dollar strengthened in the overseas market and Brent oil continued to move up.