Bulls seem to have made a comeback

Indian markets rallied sharply on Thursday on the back of positive global cues as dovish US Federal Reserve opened the door to further rate cuts.

The Sensex gained 488 points or 1.25 per cent to close at 39,601, while the Nifty ended 140.3 points or 1.2 per cent higher at 11,831.75. The broad market indices like the Mid-Cap gained more, thereby outperforming the Sensex/Nifty. The market breadth was positive on the BSE/NSE.

Advance decline ratio came back to positive on the NSE for the first time in almost 4 weeks. According to analysts, this is more a reflection of return of positive mood among traders even as the recently beaten down stocks bounced up sharply due to short covering/halt of selling pressure.

Sectorally, the top gainers were the BSE Auto, Capital Goods, Healthcare and Telecom indices. There were no losers.

Major Asian markets have closed on a positive note with China-Hong Kong markets standing out. European indices like FTSE, DAX and CAC are trading in the green. European stocks surged to six-week highs on Thursday, as investors piled into riskier assets after the US Federal Reserve joined the growing number of major central banks signaling that a new round of monetary stimulus was likely.

Oil prices jumped amid escalating tensions in the Middle East as a US official said one of the country's military drones was shot down by an Iranian missile.

Technical View
Technically, with the Nifty bouncing back sharply and closing above the previous session's highs, the bulls seem to have made a comeback. Further upsides are likely once the immediate resistance of 11,843 is taken out. In such a case 11,914 could act as a resistance. Crucial supports to watch for any weakness are at 11,802-11,707.

"After showing weakness from near the hurdle of 11,780-800 levels in the last session, the Nifty witnessed a sharp upside bounce on Thursday and closed the day with hefty gains of 140 points. A long bull candle was formed on Thursday and the broad based buying was seen in beaten down stocks in Thursday's session. Technically, this pattern signals a sharp comeback of bulls from the lows," said Nagaraj Shetti, Technical Research Analyst, HDFC Securities.

The crucial overhead resistance of 11,780-800 (as per the concept of change in polarity-previous broken support) has been broken on the upside and Nifty closed above it.

Market View
Markets recovered sharply and gained over a percent, taking a pause from prevailing corrective phase. After the initial downtick, Nifty gradually recovered from the day's low and gained momentum in the last hour, thanks to short covering in derivatives positions. Dovish commentary from the US Fed combined favourable cues from the local front boosted the sentiment.

"We may see some consolidation in the following session; however, movement on the stock specific front would keep the traders busy,” said Jayant Manglik, President- Retail Distri-bution, Religare Broking Ltd.