Nifty and Sensex rally over 1% as market recovers from oversold conditions

Indian stock markets saw a significant recovery on Tuesday with both the Sensex and Nifty surging by over 125 per cent during the early trading hoursThe Nifty 50 index surged by more than 300 points reaching 23770 while the Sensex jumped over 1000 points climbing to 78410 at the time of reportingMarket experts have attributed this rally to positive global cues and an oversold market condition However they have also cautioned that several underlying challenges for Indian stocks remain which could affect the sustainability of the rally These challenges include persistent foreign portfolio investor FPI selling albeit at a reduced pace downgrades in corporate earnings slower economic growth and high real interest rates all of which are dampening growth prospectsAjay Bagga a banking and market expert noted Positive global cues and a heavily oversold market are seeing a 1 per cent to 15 per cent bounce in the Indian markets today The causes of the downtrend in Indian stocks are still very much present FPI selling though at a reducing intensity downgrades to corporate earnings slower economic growth and high real interest rates are proving a drag on growth impulses Todays bounce in the Indian markets should be seen as a recovery from oversold levelsExperts have also pointed out that technical indicators suggest further potential gains The Niftys rally could extend if it manages to close above the lower Bollinger Band which is currently situated near 23490Akshay Chinchalkar Head of Research at Axis Securities explained The Niftys 300point rally has the potential to extend particularly given the strength of the recent downtrend If the Nifty closes above the lower Bollinger Band today ndash currently near 23490 ndash it would trigger a Bollinger outside inside signal This pattern typically occurs when the price closes below the band on the previous day followed by a close above it If this happens the next logical upside target would be the 20day moving average which currently sits near 24125 Support in the 2320023300 area remains critical on the downsideDespite the recovery experts have stressed that this should not be mistaken as the start of a bullish trend FPI selling is likely to continue and while domestic investors with available funds may find opportunities in stocks that have corrected sharply the overall sentiment remains cautiousShriram Subramanian Founder and Managing Director of InGovern Research Services added The markets are showing initial signs of recovery FIIs will likely continue to sell but domestic investors sitting on cash may find value in stocks that have been significantly corrected and are available at reasonable valuations However this bounce does not signal a bullish marketMarket sentiment could further improve depending on the outcome of the Maharashtra state election results If the Nifty manages to close above the 24000 mark it could signal a more sustained upward movementVijay Chopra a market expert stated Markets were oversold and this bounce was long overdue The markets bounced back from the 200day moving average If the Maharashtra election results are positive the markets could resume their upward trajectory It is essential that the market closes above 24000 for a sustained rise This could also mark the beginning of the Santa rally which typically lasts until DecemberIn summary while the markets have shown signs of recovery experts remain cautious about the sustainability of this bounce amidst ongoing macroeconomic challengesWith inputs from ANI