Sensex, Nifty plunge more than 1% before rebounding

Mumbai: Indian equities rebounded on Tuesday, snapping a four-day losing run, as investors perceived the market as oversold for the moment. Trading was volatile-the Sensex and Nifty plunged more than 1% before recouping losses. The Volatility Index or VIX, a fear gauge, ended 2.8% higher on Tuesday despite the recovery, suggesting traders are still not convinced that the near-term risks to the market have gone away.

The Sensex ended up 198.44 points or 0.3% at 58,664.33. The Nifty rose 86.80 or 0.5% to close at 17,503.35. "The short-term formation is still on the weaker side, but due to the extremely oversold situation, the market registered a technical bounce-back," said Shrikant Chouhan, head of equity research, retail, Kotak Securities.

FPIs Remain Sellers

If the Nifty slips below 17,400, it could fall to 17,280-17,330-levels, he said.

Foreign portfolio investors (FPIs) remain consistent sellers in the market after multiple downgrades on Indian equities by global brokerages recently. FPIs on Tuesday sold Indian shares worth Rs 4,477.06 crore while domestic institutional investors bought shares worth Rs 1,412 crore.

"What we are seeing is more of a relief bounce after technical indicators became oversold," said Sriram Velayudhan, vice president, alternative research, IIFL Securities. "Till we don't take 17,800, we are going to remain in a corrective phrase." He expects the Nifty to decline to 17,200.

The Sensex and Nifty had lost nearly 4% each over the last four sessions. Half of this fall came on Monday as indices ended 2% down in the wake of Reliance Industries putting its stake sale to Saudi Aramco on the backburner. While the lack of triggers after September quarter earnings led to some profit booking, Paytm's listing debacle also soured sentiment.

Brokerage Nomura said there are risks to earnings expectations going ahead as demand slows and cost pressures persist.

"Against this backdrop we find market valuations expensive at 21.4 times one-year forward earnings," said Nomura. "Globally higher inflation expectations and faster-than-expected normalcy in monetary policy are the key risks for equities."

Patym's disappointing debut and the announcement that the new farm laws will be repealed contributed to nervousness among investors.

Power Grid was the top gainer on the Sensex with a nearly 4% rise. NTPC, Tata Steel, Bharti Airtel and Sun Pharma gained 1.7-2.5%. IndusInd Bank declined the most on the index, ending 2.6% down.

Meanwhile, the Nifty Metal index gained about 3% on Monday led by Vedanta, which rose 6.3% to Rs 348.95 on the NSE amid reports that promoters of the company, Twin Star Holdings and Vedanta Netherlands Investments BV, are looking to purchase up to 170 million shares of Vedanta Ltd at an indicative price of Rs 350 per share. It rose 8.1% to Rs 355.15 on the BSE.