Market Rally Driven by Dual Positive Factors
Indian equity markets witnessed significant gains on Wednesday as both benchmark indices, the Nifty 50 and Sensex, climbed higher driven by optimistic developments on multiple fronts. The positive momentum was primarily fueled by advancements in trade discussions between India and the United States, coupled with hopes that a potential government shutdown might be averted soon.
The market sentiment received an additional boost from exit polls emerging from Bihar's state elections, which indicated a likely victory for the ruling coalition in India. Market analysts noted that these political developments contributed significantly to the improved investor confidence throughout the trading session.
Key Market Performance Metrics
As of 11:31 IST, the Nifty 50 climbed 0.75% to reach 25,887.65, demonstrating strong upward movement. Simultaneously, the BSE Sensex increased by 0.76% to stand at 84,507.49. This performance followed a rise of approximately 0.5% in the previous trading session, indicating sustained positive momentum in the markets.
According to market experts, the improved mood stems from the combination of potential trade agreement breakthroughs between India and the U.S. and the exit polls signaling a strong victory for the NDA in Bihar. While these factors have fostered an optimistic outlook, analysts caution that they might not be sufficient for the markets to achieve a clear breakout and sustain a prolonged rally.
Technical Analysis and Market Outlook
Jay Thakkar, Vice President & Head of Derivatives and Quant Research at ICICI Securities, provided detailed insights into the market technicals. He noted that Nifty 50 has recovered sharply from lower levels, indicating that 25,300 has become a critical support level in the near term. However, the index closed just below 25,700 levels, which represents both the highest call base and downtrend line resistance.
Thakkar emphasized that if Nifty 50 manages to break above 25,750, it is likely to test 26,000 levels, which represents the next significant hurdle. He suggested that above 25,750, investors can initiate long positions targeting 26,000, while until that level is breached, the Index may trade within the range of 25,700-25,300 levels.
The banking sector showed particular strength, with Nifty Bank emerging as one of the outperformers. Significant put base has been observed at 58,000 and 58,500 strikes, suggesting that above 58,500 levels, the Index could surge toward 60,000 levels, which would subsequently help Nifty 50 break above 26,000.
Volatility and Foreign Investor Activity
The India VIX initially bounced due to short covering but has been struggling to fall subsequently due to fresh short build-up by FIIs. There remains a risk of volatility breaking above 13 levels, which could lead to sharper corrections if Nifty 50 falls. However, if volatility moves up alongside Nifty 50, it would likely be related to short covering and thus not a major concern.
A notable concern in the current market scenario is that FIIs have been net sellers in both equity cash and Index futures during the November series. Market observers suggest that if foreign investors begin short covering, it could trigger a rally similar to the one witnessed in October.
Recommended Stock Strategies
Jay Thakkar of ICICI Securities recommends three futures for near-term investment:
TCS Futures: Buy in the range of ₹3,050-3,070 with a stop loss of ₹2,980 and targets of ₹3,130 and ₹3,170. The Nifty IT sector has been among the weakest, but recent recovery suggests potential short covering that could push stocks toward the upper end of their range.
Bajaj Auto Futures: Buy in the range of ₹8,880-8,910 with a stop loss of ₹8,790 and targets of ₹9,020 and ₹9,080. Despite good Q2 results, the stock has underperformed within the auto sector, but 8,800 represents critical support that could trigger short covering above 9,000 levels.
Jindal Steel Futures: Buy in the range of ₹1,070-1,090 with a stop loss of ₹1,040 and targets of ₹1,140-1,170. The metal sector has been a top performer in FY26 so far, with Jindal Steel witnessing significant long build-up after short-term correction.
Market participants are advised to monitor the state election final outcome and the critical levels of 25,750 on Nifty 50 and 58,500 on Bank Nifty, as breaching these levels could lead to meaningful upward movement in the markets.
