In a display of resilience, Indian equity markets staged a remarkable comeback on December 13th, shrugging off early losses and closing with significant gains. The Sensex and Nifty rebounded sharply from intraday lows, defying global jitters and weak Asian cues, as value buying in previously beaten-down stocks fueled a broad-based recovery. This resurgence of optimism came amid easing inflation, positive sectoral momentum, and hopes of a revival in consumer demand, although investors remain cautious ahead of key macroeconomic data and the upcoming US Federal Reserve policy meeting.

Market performance:

The BSE Sensex surged 843 points, or 1%, to close at 82,133, while the NSE Nifty gained 220 points to settle at 24,768. The indices recovered nearly 3% from their intraday lows, showcasing the strong buying interest that emerged during the session. The Nifty Midcap Index also demonstrated resilience, ending the day nearly flat.

Factors driving the rebound:

• Easing inflation: November inflation data showed a further easing of price pressures, raising hopes for a potential rate cut by the RBI in February and boosting investor confidence.
• Sectoral strength: FMCG, IT, and banking stocks led the market recovery, driven by expectations of improving consumer demand, price hikes in the FMCG sector, and optimism about credit growth and asset quality in the banking sector.
• Technical factors: The Nifty's rebound from a key support level, forming an inverse head-and-shoulders pattern, signaled bullish momentum and contributed to the positive sentiment.
• Value buying: Attractive valuations in certain sectors and stocks enticed investors to capitalize on the recent market weakness, leading to a surge in buying activity.

Sectoral performance:

• FMCG, IT, and banking lead the gains: These sectors were the primary drivers of the market recovery, with FMCG stocks benefiting from price hikes and expectations of a revival in consumer spending. IT stocks gained on hopes of increased US spending, while banking stocks were buoyed by easing inflation and improving credit demand.
• Metal stocks remain under pressure: Uncertainty surrounding China's stimulus measures weighed on metal stocks, despite a partial recovery from intraday lows.

Market outlook:

While the market rebound signals a return of positive sentiment, investors remain cautious ahead of next week's US Federal Reserve meeting and the release of domestic WPI inflation and PMI data. Experts suggest that sector rotation and stock-specific action are likely to drive market performance in the near term, with technical indicators suggesting further upside potential. However, global volatility and macroeconomic uncertainties warrant a cautious approach, with risk management and selective stock picking remaining crucial.

The Indian stock market's strong rebound from early losses demonstrates its resilience and underlying strength. While global uncertainties and upcoming macroeconomic data warrant caution, easing inflation, positive sectoral momentum, and value buying have instilled renewed optimism. The market's ability to sustain this upward momentum will depend on a combination of factors, including the outcome of the US Federal Reserve meeting, domestic economic data, and global market trends. Investors are advised to remain vigilant, monitor key developments, and adopt a balanced approach to navigate potential market volatility.

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