What is your outlook for the stock market trading on 22nd September. Do you see the recovery sustaining?

If it started weak on Tuesday, then the second half was a complete revelation as the market bounced back sharply, offsetting all the losses of Monday. In fact, Nifty rallied by 165 points and Sensex by 515 points to almost recoup losses of Monday. Evergrande of China is still a concern, but for now the US Fed meet promises to hold stead, so that is good news.

There were other positives too in the market. The advance decline ratio was firmly positive at 40:10 as metals spurred the Nifty recovery. Positive cues from Europe and from Dow Futures also buoyed the markets on Tuesday. There was conviction in the market that Chinese government would bail out Evergrande, so the metal crisis should pass.

FPIs were net buyers on Tuesday to the tune of about Rs.1,042 crore of equities but the real bounce back came from the domestic buying in equities by mutual funds and insurers of Rs.2,168 crore. One must discount the impact of the Carlyle deal. Globally, Dow was flat and NASDAQ and Europe were higher. However, SGX Nifty is 28 bps lower in early trades.

That brings us to the interesting question on whether the bounce can sustain. That will have to wait till there is clarity on Wednesday night from the FOMC minutes. If the Fed shows willingness to put off the taper to next year, the markets should be enthused. That is very likely considering the short term disruptions that Evergrande is likely to cause.