A day after a bloodbath on Dalal Street in which markets suffered the worst single-day fall in 4 years, the benchmark indices, Sensex and Nifty, opened in the green on Wednesday.
The Sensex was up 1,031.36 points or 1.43 per cent at 73,110.41. The Nifty was up 131.10 points or 0.60 per cent at 22,015.60. However, the recovery run did not last long as both indices faced selling pressure as investors remained cautious.
As stock market participants expected the BJP to emerge as the single largest party, the outcome of the Lok Sabha elections is likely to lead to further volatility and selling pressure.
Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said: "The market will take some time to absorb the unexpected election results. Stability will return to the market soon but volatility will continue till there is clarity on the cabinet and the key portfolios."
"A sharp rebound in the market is unlikely in the near term but sectoral preferences might change. Sectors like FMCG, healthcare and IT will find increasing preferences and the momentum plays will slowdown," he added.
One positive that has emerged from the sharp market correction, according to Vijayakumar, is that "excessive valuations have moderated a bit". He feels that this will facilitate institutional buying once clarity emerges on the formation and composition of the cabinet.
"Investors can start nibbling at high quality large-caps in IT, financials, autos and capital goods," he added.
Consumer and FMCG stocks were dominating proceedings, with HUL up over 7% and Britannia up over 6% on the Nifty50. Another FMCG stock, Tata Consumer Products, also gained sharply in early trade.
On the other hand, the top losers were BPCL, L&T, Power Grid, NTPC and Adani Enterprises.
Prashanth Tapse, Senior VP (Research), Mehta Equities Ltd, said, "In a dramatic downturn, Nifty50 recorded its biggest single-day plunge in over four years, falling 6%, as bears took control of Dalal Street following the BJP's failure to secure a clear majority in the elections."
"The Narendra Modi-led BJP leads with 293 seats, but concerns over the new government's ability to implement bold policies weighed heavily on the market. GIFT Nifty remains subdued despite Modi's victory speech, with technical indicators pointing to a trading range of 21000-22500. Meanwhile, WTI crude oil futures dropped to a four-month low, offering some relief," he noted.
"Eyes are now on the RBI's three-day MPC meeting. Preferred trades: Nifty to sell at 22200-22500 with targets at 21500/21000, and Bank Nifty to sell at 47500-47700 with targets at 46077/45701. Bearish on Dixon Technologies, CUB, and Exide," Tapse added.
