InvestorQ : Why did the markets bounce back so sharply from lower levels; both the Nifty and the Sensex? Is this a sign that market has bottomed out?
sara Kunju made post

Why did the markets bounce back so sharply from lower levels; both the Nifty and the Sensex? Is this a sign that market has bottomed out?

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1 year ago
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The Nifty had corrected continuously corrected for 9 days in succession and that is an 8-year record. After such a sharp correction, there was some buying at lower levels and also some short covering in the futures market. Also, traders who had taken short positions in the market would typically like to stay light in the market ahead of a very important event on 23rd May, when the shape of the new government will be a lot clearer. The Sensex had fallen over 2000 points in less than 8 trading session and that led to some buying at lower levels. Also, Trump announced that he would be open to talk to Xi of China and that also buoyed the Dow futures and had an impact on the Indian stock markets too.

You will have to be a little careful before jumping in and buying. As a trader, it will be better to wait out the outcome of the election results on 23rd May and then take a call on buying in the markets. Also, if you notice the VIX index is still at around the 27 levels and the markets can bottom out only when the VIX comes to much lower levels. Normally, after such a sharp correction, the markets will take time to bounce back and you rarely get to see a V-shaped recovery in the markets. Quarterly results have also been quite mixed with pressure visible on banks, consumer durables, autos and even FMCG. Trade accordingly.

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