The Indian stock market resumed its rally on a sharper note after a brief consolidation. The positive global cues, FII buying and the short covering, fuelled the market to move higher. The Nifty gained by 239.85 points and closed at 14,521.15.
All the sectoral indices participated in the rally. BFSI sector stocks witnessed a sharp rally. The Realty index jumped 4.19 per cent. Banknifty went higher by 1.93 per cent and Financial services index went up by 2.41 per cent. The Pharma index recovered by 1.68 per cent. The Metal index almost erased yesterday's losses and gained by 2.92 per cent.
The overall market breadth is very positive, with 1,413 stocks advanced and 483 declined. On a surprising note, the Nifty recovered almost two days' losses. It rallied over 250 points and closed above the previous day's high.
The rally was fuelled mostly by the short covering and a fresh buying interest by the institutional investors. The Nifty closed above the short term averages (5EMA and 8EMA) decisively.
As we expected, the volatility is increasing on both sides. Interestingly, the MACD histogram shows that the bearish momentum has not waned yet. With over two per cent recovery from yesterday's low, the market has demonstrated very strong undercurrents.
The buoyancy is supported across the sectors. The India VIX did not sustain above 25 levels and fell by over six per cent is another factor for a market rally.
Almost every sector advanced by one and half to two per cent. With the last two days' fall, the indicators came down from an overbought condition. So, now the potential to go up has increased. On a lower timeframe chart, the Nifty has broken out of a bullish flag. This flag breakout is within the upward channel.
The last three days of the swing is just a minor consolidation. Let us wait and watch for whether this rally can sustain a move above the prior high before the budget. The support for Wednesday is at 14,446-14,409 zone. Only a close below this zone, the market will become weak again.
(The author is a financial journalist, technical analyst, trainer, family fund manager)
