Stock market rally: Investors should not read too much into today's gains, say analysts

Stock investors should not read too much into Wednesday's rise, especially as it comes after a 10-day slide for NSE barometer Nifty. Marketmen said there still remains uncertainty over trade war and global economic health, even as some pockets look quite reasonable following the recent slide. 

The rise today came amid talks that the Trump administration could reverse some of tariffs it imposed on Canada and Mexico a day ago.

Wednesday's rebound was encouraging, but traders should avoid reading too much into a single-day bounce and wait for further confirmation, said Ajit Mishra of Religare Broking. 

"On the benchmark front, Nifty may face resistance around the 22,500-22,700 zone if the recovery continues. Amid this setup, we maintain a stock-specific approach, favoring banking, financials, and metals for long trades while remaining selective in other sectors," he said.

Vinod Nair of Geojit Financial Services said emerging markets, including India, witnessed a relief rally, supported by a weakening dollar. 

"While the long-term consequences of the ongoing trade conflict remain uncertain, elevated US inflation in the near term could reduce the likelihood of an interest rate cut. The sustainability of this recovery remains uncertain due to escalating global trade tensions and their potential long-term economic ramifications."

Prashanth Tapse, Senior VP (Research) at Mehta Equities said the recovery remains fragile due to global uncertainty and FPIs showing no signs of halting outflows and that the market could remain volatile going ahead.

Technical outlook positive

Shrikant Chouhan of Kotak Securities Nifty and Sensex successfully cleared the 22,200 and 73,200 resistance zones today, and the post-breakout, the positive momentum intensified. 

"A long bullish candle and a promising reversal formation on the daily charts indicate a further uptrend from the current levels. We are of the view that as long as the market is trading above 22,200/73200, the bullish sentiment is likely to continue," Chouhan said.

On the higher side, the indices could move up to 22,500-22,550 and 74,300-74,500 levels. The uptrend would be vulnerable on falls below 22,200 and 73,200 on Nifty and Sensex.