Sensex, Nifty rebound strongly; time to re-enter share market or is further correction on the cards?

After having nosedived 3% during the previous session, domestic benchmark indices on Friday were looking stronger. The NSE Nifty 50 reclaimed 11,000-mark, with index heavyweights supporting the move upwards. However, after the intense sell-off in global equity markets, is it safe enough to enter the stock markets again? Well, analysts still remain sceptical for the near term with technical analysts placing the immediate support for Nifty in the range of 10,800-10,750. Investors are being advised to stay cautious. Equity markets have undergone a correction after having jumped over 50% from March lows.

“While the markets spent some time above the psychological level of 11000, the weakness in the index continues. The resistance on the upside is at 11300. Until that is not crossed, we cannot surmise that the short term bear trend has been completed and an upside rally will ensue,” said Manish Hathiramani, proprietary index trader and technical analyst, Deen Dayal Investments. He added that on the downside, the Nifty can fall to achieve the 10750 level, which is where he expects the October series to close at. 

Equity markets have seen foreign institutional investors (FII) pull away Rs 8,408 crore from domestic stocks so far this week. In the September series, FIIs remained net sellers in the cash market segment and cumulatively sold equities worth Rs 9,525 crore. “We had been advocating caution since Nifty was rallying from 11,350 to 11,700. But after the recent correction that proved our thesis, we were expecting a rebound as markets were in the oversold territory. From here on it may extend a bit to 11,100 and 11,200 which would again act as resistance from where selling could resume,” said Sameet Chavan, Chief Analyst-Technical and Derivatives, Angel Broking.

He advises accumulation at these levels. “In our sense, from the levels of 10-800-11,000 buying can be started in a staggered manner. If 10,800 levels are breached then there could be another 300-400 point correction which would again provide good opportunity for accumulation in a staggered manner,” he said. Chavan added that 10,500 is the level to watch out for on the downside.

Despite the current correction, analysts believe that stock markets are still in a bull phase. “We are in no way in a bear market,” said S Ranganathan, Head of Research at LKP Securities. He further added that the crucial October-December quarter is now just around the corner and some form of government stimulus ahead of it would bring the bulls back to life. “In the last 5 months, only RIL, TCS, Infosys, and HDFC Bank led the rally on the index. Between the four of them they have had this rally on the index. Only for a brief few sessions, broader markets participated.” he added. Sensex recovered nearly 800 points during Friday session to end above 37,000 mark.