Sensex, Nifty 50 rebound a day after stock market crash. Experts unveil this investment strategy amid volatility

Stock market today: A day after suffering strong losses of about 1.5 per cent, Indian stock market benchmarks- the Sensex and the Nifty 50 – jumped by almost a per cent each intraday on Friday, November 29.

The Sensex and the Nifty 50 rose 1 per cent to the levels of 79,848.76 and 24,144.45, respectively.

The BSE Midcap and Smallcap indices climbed about half a per cent during the session. BSE-listed firms’ overall market capitalisation (m-cap) rose to nearly ₹446 lakh crore from ₹443 lakh crore in the previous session, making investors richer by about ₹3 lakh crore in a day.

Experts expect the market to remain volatile in the short term amid persisting headwinds.

Plethora of market headwinds

The recent crash in the Indian stock market could be attributed to selling by foreign institution investors (FIIs) amid weak Q2 earnings and heightened geopolitical tensions.

“The Nifty 50 fell 6 per cent in October after witnessing a bull run of about 44-45 months without any significant correction. This fall was led by FIIs pulling out because of the Indian stock market’s relatively high valuations compared to its global markets. Moreover, there was a conspicuous slowdown in urban consumption, and government spending was slow in the first half of the current financial year (H1FY25) due to elections and heat waves,” Kunal Mehta, Associate Director at Equirus, observed.

“Selling by FIIs is the primary reason behind the recent market downtrend. This has to do with the strengthening of the dollar as the return of Donald Trump as the US President has raised expectations that the US economy and its currency will be strong. This has created some nervousness for foreign investors,” said G. Chokkalingam, the founder and head of research at Equinomics Research Private Ltd.

The Trump factor is also a factor that has infused nervousness among market participants.

“The market has not completely discounted the Trump factor, and the impact on India remains uncertain. At this point, it is unclear whether Trump will favour India or if certain sectors might face setbacks,” said Chokkalingam.

Experts find the FII trend perplexing, especially after the recent few days of buying.

“A perplexing market action in recent days is the inexplicable volatility in FII activity. A few days of buying followed by yesterday’s massive selling of ₹11,756 crore is difficult to explain. What are the factors contributing to this apparently irrational activity? Is this a one-off? Or is there more to come? Answers to these questions will be available in the coming days,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Geopolitical tensions, weak corporate earnings and uncertainty about the US interest rate trajectory are additional headwinds for the market.

Investment strategy amid volatility

The domestic market is currently in a corrective phase, which may prompt investors to book profits on every rise. However, experts recommend focusing on long-term opportunities and buying during dips.

“The market is going down due to earnings slowdown and fear of trade tariffs, but I would not say this is a ‘sell-on-rise’ market. Investors can get some value opportunities in this market,” said Amar Ambani, Executive Director at YES SECURITIES.

Ambani believes the earnings slowdown could be partly addressed in Q4 due to increased government spending and recovery in urban consumption.

According to Mehta of Equirus, investors should focus on sectors catering to the rural economy, as good monsoons and subsidies have boosted rural incomes. Also, pharma + healthcare (hospitals and diagnostics) will do well. Also, with deposit growth picking up, large banks will also do well, said Mehta.

“Investors should wait and watch. A buy-on-dips strategy may not yield short-term gains in this market. However, this strategy can be applied by investors with a medium to long-term time horizon. Large caps in financials, IT, capital goods and telecom are ideal for medium- to long-term accumulation,” said Vijayakumar.

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