Sensex Rally Today May End 8-Week Losing Run; Experts Weigh In

Sensex Breaks Losing Streak: Can the Rally Continue?

After eight weeks of declines, the Sensex has staged a significant recovery, but market experts caution about the sustainability of this rally.

Market Recovery Amidst Challenges

The Indian stock market’s benchmark indices experienced a notable turnaround on Friday, with the Sensex surging by 1,076 points, or 1.15%, to reach 72,669 during intraday trading. It ultimately settled at 72,472, marking an increase of 879 points, or 1.23%. This rally comes after a tumultuous period characterized by rising crude oil prices, elevated bond yields, and a significant sell-off by foreign institutional investors (FIIs).

The Nifty 50 index also reflected this positive momentum, closing 0.4% higher for the week, following a 1.30% increase to 22,520 today. The end of the eight-week losing streak has sparked discussions among analysts regarding the potential for sustained gains.

Expert Insights on Market Sentiment

Arun Kejriwal, founder of Kejriwal Research and Investment, attributes the market’s fluctuations to geopolitical tensions, particularly with the upcoming mid-term elections in the U.S. He noted that uncertainty surrounding U.S. President Donald Trump’s actions could be influencing investor sentiment. Kejriwal highlighted that IT stocks are leading the rally, despite facing challenges from H-1B visa restrictions, which could hinder the industry’s ability to secure new business.

While the current rally may be a “dead-cat bounce,” Kejriwal cautioned that the underlying issues affecting the market remain unresolved, suggesting that the upward trend may not be sustainable in the long run.

Macroeconomic Headwinds Persist

VK Vijayakumar of Geojit Financial Services echoed these sentiments, emphasizing that high U.S. bond yields pose a significant challenge to market stability. With the U.S. 10-year Treasury yield hovering around 5.24–5.25%, the likelihood of continued selling by FIIs remains high. This year, FIIs have sold a staggering ₹2.91 trillion worth of stocks, marking the highest level of outflows on record.

As a result, the Sensex is down 15% year-to-date, while the Nifty has declined by 14%. Analysts caution that while the recent gains are welcome, they may not signal a lasting recovery.

Valuation Considerations

Despite the market’s challenges, some analysts believe that current valuations present an attractive opportunity for investors. According to DSP Mutual Fund’s September Netra report, Nifty 50 valuations have corrected to fair or cheap levels, with a trailing P/E ratio of 19.26x compared to a historical median of 20.9x. Additionally, the price-to-book ratio stands at 2.75x versus 3.5x.

The report suggests that Indian equities are currently underperforming relative to emerging markets, indicating a potential opportunity for selective investment in high-quality large-cap stocks.

Key Highlights

• Sensex rallied 1,076 points, ending an eight-week losing streak.
• Nifty 50 closed 0.4% higher for the week, reflecting positive momentum.
• High U.S. bond yields continue to pose challenges for market stability.
• FIIs have sold ₹2.91 trillion worth of stocks this year, the highest on record.
• Valuations for Nifty 50 are now at fair or cheap levels, presenting investment opportunities.

Investor Note: The recent rally in the Sensex offers a glimmer of hope for investors, but ongoing macroeconomic challenges and high bond yields suggest that caution is warranted. Investors should consider selective opportunities in high-quality stocks while remaining vigilant about market volatility.