What is your trading opinion for the market on Tuesday 05th October? Is this bounce in the Nifty sustainable?

Monday witnessed a sharp bounce in the markets after tepid previous week when the Sensex faced resistance at 60,000 levels. On Monday, Indian markets took a cue from the Dow and the NASDAQ over the weekend and bounced sharply. There was buying in the stock markets across Pharma, metals and auto.

The A/D ration on Monday returned sharply to the positive on Monday at 36:14 for the Nifty stocks. Mid-caps and small caps did substantially better than the Nifty. The striking feature of the market on Monday was the sharp fall in VIX from the 20 levels in the previous week to around 16.7 levels. However, global situation remains fluid.

FPIs were net buyers on Monday worth Rs.861 crore in equities while domestic institutions bought stocks worth Rs.228 crore. Evergrande and US bond yields are the big challenges. In terms of global markets. There was a sharp fall of 1.5% to 2% across the US markets as tech stocks reacted negatively to rising yields. SGX Nifty is 50 bps lower in early trades.

It is hard to say if the bounce is sustainable but most likely this was driven by short covering. Fresh buying is unlikely to come in unless we see greater clarity on US bond yields, their taper stance and the resolution of the Evergrande crisis in China. These remain short term head winds and till then the markets will be under pressure.