Sensex, Nifty rally 8.5% in April: Hold or book profit?
What's the story
Indian stock markets have witnessed a major recovery in April, with the BSE Sensex and Nifty 50 both surging by 8.5% each. However, despite this strong performance, the benchmark indices are still about 5% lower than their pre-war levels. The Sensex is currently around 4,180 points away from its February 26 level of 82,250 while the Nifty remains nearly 1,275 points or almost 5% below its pre-war level of 25,500.
International impact
Global markets bounce back
The recovery in Indian stocks comes as global markets have also bounced back from the losses incurred due to the US-Iran war. China's CSI 300 Index has recovered from its losses since the conflict began in late February, along with Taiwan and Singapore. On Wall Street, S&P 500 has also bounced back to near record highs. Hopes of further US-Iran negotiations have kept oil prices below $100/barrel.
Market outlook
India showing resilience amid global uncertainty
Despite Brent crude remaining close to $100/barrel, which poses a threat to inflation and fiscal stability, Indian markets have shown remarkable resilience. Sunil Singhania, founder of Abakkus Asset Manager, said in his April market outlook that India is one of the more resilient large economies despite global uncertainty. He attributed this resilience to strong domestic demand, government-led capital expenditure, easing monetary conditions and improving balance sheets.
Risk assessment
Earnings bounce back expected later this year
Singhania further noted that while near-term corporate earnings may be impacted by higher energy costs and supply chain disruptions, much of the war-related risk has already been factored in. He said if the ceasefire holds and conditions normalize, earnings could bounce back over the rest of the year. This comes as a positive sign for investors looking at long-term growth potential amid current market volatility.
Market predictions
Nifty technical outlook
On the technical front, analysts have predicted that as long as Nifty holds the 23,550-23,500 zone (20-day and 10-day exponential moving averages), it could gradually move toward 24,000-24,100 and then 24,200-24,300 in coming sessions. However a fall below this zone could trigger fresh selling pressure. They also pointed to a long green candle formation on the daily chart indicating a counterattack-type bullish pattern for Nifty's higher low formation at 23,555.