Stocks rise after 6-day drop, but concerns linger

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₹17.95 trillion in investor wealth. Analysts, however, refrained from calling this a recovery, labelling it as a “dead cat bounce" whose life is uncertain, given escalating geopolitical tensions and rising bond yields in the US. The rise coincided with foreign brokerage JP Morgan’s upgrade of India from neutral to overweight, days after Morgan Stanley put India on top of its overweight stance.

JP Morgan recommended that investors utilize near-term corrections as buying opportunities, citing historical trends that have often seen a market rally in the run-up to general elections. However, foreign portfolio investors (FPIs) remained net sellers, offloading a provisional ₹1,500 crore in shares, while domestic institutional investors (DIIs) bought ₹313.69 crore, indicating that Friday’s market rebound was driven by short-covering. FPIs have sold shares worth ₹31,524 crore over the past two months.

The Nifty recaptured the 19,000 mark, rising 1.07% to 19,059.7, while the Sensex jumped 1.01% to 63,782.8. Both indices shed 4.8% and 4.9%, respectively, in the preceding six sessions. The Nifty Midcap 150 and the Nifty Smallcap 250, which underperformed in the past six days by falling around 6% each, gained 1.46% to 14,513.70 and 1.93% to 12,024.90, respectively.

Friday’s market rebound was expected as the preceding six-day decline pushed indices, including Nifty and Bank Nifty, into oversold territory. This was evident through the relative strength index (RSI), with Nifty and Bank Nifty RSIs at 27 and 25, respectively. The typical range for RSI, which measures the magnitude of recent price changes, is 30-70, with below 30 indicating oversold conditions and above 70 signalling overbought levels.