The market witnessed huge volatility on the day of the state election results where the ruling BJP retained power in Gujarat for the six consecutive term in a closely fought battle. After opening 700 points lower, the Sensex recovered, as it became clear that the BJP would return to power. The Sensex rose 138.71 points,. or 0.41 per cent, to settle at 33,601.68, while the Nifty 50 gained 55.95 points, or 0.54 per cent, to settle at 10,388.75.

Among the secondary indices, the BSE Mid-Cap Index rose 0.76 per cent and the Small-Cap Index gained 0.45 per cent, while the BSE Metal Index (up 1.83 per cent), the Auto Index (1.21 per cent), Healthcare (0.78 per cent), Telecom (0.91 per cent, the Bankex (0.64 per cent) outperformed the Sensex.

Technical view

Sameet Chavan, chief analyst-technical & derivatives, Angel Broking, said: “Today, the initial ten minutes of trade were quite intimidating, as the Nifty tumbled more than 250 points in the blink of an eye. However, later on we witnessed a V-shaped recovery throughout the remaining part of an opening hour. Due to the sharp recovery in the first half, the Nifty surpassed the recent swing high of 10,410 on an intraday basis. But, a closing above this could have been a trend deciding move in the near-term, and hence, the bears somehow managed to defend this level on a closing basis.

“Going ahead, we continue to see this level as an important hurdle and only a close above this point would negate the cautious approach. Till then traders should keep a close track of the near-term range of 10,410–10,319. A breakout from this range would dictate the near-term direction for the market. Traders are advised not to take aggressive positions and rather should keep booking profits as we continue to expect a rise in volatility.”

Things to watch for

Going forward, the outlook remains positive with a focus on housing, cement, infrastructure & metal stocks. The structural bull market sentiment will continue, however, some year-end profit taking by FIIs cannot be ruled out.

Triggers like earnings season and global market movement will be closely watched for any earnings upgrade and US tax reform for the direction. Investors will now also focus on developments from the GST front, including implementation of  e-way bill mechanism and Central GST (Compensation to States) Bill, which will be tabled in Parliament soon.

Market outlook

Sanjeev Zarbade, vice-president–PCG research, Kotak Securities, said: “Equity benchmarks remained strong as elections results have indicated that the BJP will form its governments in Gujarat and Himachal Pradesh. Going ahead, the future direction of the market would be influenced by global monetary developments and fund flow from domestic and foreign investors. Central bank tightening and high oil prices would be the key risks.”