What is your stock market outlook for 09ths December after the massive rally over last 2 days in the Nifty and Sensex?

It was a rebound beyond all imagination. In just 2 days, Sensex gained 2,000 points resulting in investor wealth accretion of Rs.750,000 crore. The big trigger for the markets was the RBI decision to maintain status quo on repo rates and the accommodative stance of the policy. Now, it is also emerging that the Omicron virus was unlikely to be too lethal in its impact.

On Wednesday, the markets got a boost in terms of sentiment after it became clear that the RBI was not hiking rates or constraining liquidity in the short term. The Nifty has now closed near the 17,500 levels with support from rate sensitive stocks. On Wednesday, the A/D ratio stood at 45:5 while VIX fell sharply to 17 levels. Among sectoral indices, the PSU banks were up 2.6% while IT gained 1.95%.

Foreign investors were net sellers on 09-December, albeit muted at just about Rs.579 crore while domestic funds bought stocks worth Rs.1,736 crore. The aggression in FPI selling appears to be receding in the Indian markets even as the domestics continue to lend support. On Wednesday, the Dow and NASDAQ were higher by 25 bps. European markets lost around 70 to 80 bps while SGX Nifty is trading 28 bps higher in trades.

The RBI stance headwind may be gone but there are still other headwinds for stocks. However, this could easily change in tandem with the Fed approach to monetary policy, which will be a lot more evident at a later date. However, headwinds are still strong in the form of the continued spread of the Omicron virus and the worsening financial position of Evergrande in the midst of a spate of defaults.