How do you see the market cues for 02 December after the sharp bounce in the Nifty and Sensex on 01-Dec?

On 01 December, the Nifty ended 183 points higher with the advance decline ratio or the A/Dr ration favourable for a change at 35:14. That indicates improving breadth. The bigger concern is the global selling with institutional selling not abating at all and only domestic investors lending support.

On Wednesday, there was short covering activity seen in banks and metals despite concerns that a hawkish monetary stance could hit banks and a global slowdown could hit China and the demand for metals.

On 01-Dec, the foreign investors were net sellers on worth Rs.2,766 crore in equities although the gross volumes were much lower than Tuesday. However, domestic funds offset this selling by purchasing stocks worth Rs.3,467 crore. The sentiments have been negatively impacted for FPIs with the hawkish stance taken by the US Fed.

Dow and NASDAQ continued their negative ride with both indices down 160 to 180 basis points. Interestingly, the bounce came from Europe where the UK, France and German markets gained by over 2% on 01-Dec. In early trades, the SGX Nifty was under pressure, down about 60 bps due to global FPI pressure.

It could be a double edged market for the Indian markets on Thursday. There was a sharp 8% fall in VIX to below 20 as the volatility subsided. The market breadth is also positive, which is a good signal. However, the overhang of the hawkish tone remains on the market for the time being and it is best to remain cautious in Indian markets.