Bulls return to Dalal Street; analysts see Nifty heading towards 23,800

Mumbai: India’s headline equity indices extended gains to the second straight day, recouping in two sessions nearly a third of the losses made since the start of the West Asia conflict, and restoring about Rs 16.15 lakh crore in market capitalisation. Investors have regained some confidence across Asian markets on cooling crude oil prices and talk of communication between the US and Iran aimed at bringing an end to the war.

The NSE Nifty rose 394 points, or 1.7%, to close at 23,306.45 on Wednesday. Analysts said the recovery could continue over the next few days and the Nifty may go up to 23,800 in the coming days. The BSE Sensex rose 1,205 points, or 1.6%, to end at 75,273.45. Over the last two sessions, the two indices have risen nearly 3.5% each.

Both had fallen almost 10.6% each from the start of the conflict until Monday. Since February 28, when the war began, market cap in India is down ₹32.87 lakh crore.

Elsewhere in Asia, Japan was up 2.9%, China advanced 1.3%, Hong Kong rose 1.1%, South Korea gained 1.6% and Taiwan rose 2.5%. The pan-Europe index Stoxx 600 was up 1.5% at press time.

Analysts Suggest Extended Recovery

Wall Street’s main indices were also on an upward trajectory as of press time.
“The recent de-escalation in the West Asian conflict suggests that the worst may be behind us,” said Pankaj Pandey, head of fundamental research at ICICI Direct. “While the situation remains fluid and a formal ceasefire is still awaited, markets are likely to extend their recovery in the near term, barring any fresh adverse developments.”
Chandan Taparia, head of technical and derivatives research at Motilal Oswal Financial Services, said markets are likely to extend their recovery in the near term as long as the Nifty holds above 23,000 levels.
Taparia said that a move toward 23,850 appears possible as the index emerges from oversold zones and is showing signs of a bullish divergent pattern. “However, an elevated volatility index remains a concern, which is yet to ease despite the market’s recovery,” he said.

India Volatility Index (VIX) – popularly known as the fear gauge – fell marginally by 0.4% to 24.64 levels. Normally, VIX cools off when indices rise, and a higher level may indicate traders remain cautious about the future.

“However, as crude oil prices may take longer to stabilise, the recovery is unlikely to be V-shaped. That said, over the next three to six months, we expect losses stemming from the conflict to be largely recouped,” said Pandey.

He said the recovery is likely to be led by autos, metals and BFSI (banking, financial services, insurance), with large-cap stocks offering the most favourable risk-reward profile.

“Investors may consider waiting for greater stability before increasing exposure to mid and small-cap stocks,” Pandey said.