Indian Stock Market Surges Amid Short Covering and FII Sentiment Shift

The Indian stock market saw a substantial rise at midday on Monday, with Sensex and Nifty gaining over 1100 and 300 points, respectively. Market experts attribute this surge to short covering ahead of month's end and a reduction in Foreign Institutional Investor (FII) selling pressure.

The Indian stock market experienced a notable surge during midday trading on Monday, as both the Sensex and Nifty posted remarkable gains. The Sensex increased by over 1100 points, while the Nifty climbed approximately 300 points, marking a significant uptick after last week's gloomy performance.

Banking and market expert Ajay Bagga attributed the upward trend to short coverings ahead of the monthly expiry on Thursday, October 31. 'Indian markets are seeing a mild bounce today. The reason could be short covering going into the monthly expiry on Thursday, 31st October,' Bagga explained. He noted that traders typically prefer to carry over long positions rather than shorts. Additionally, a reduction in the FII selling pressure in the derivatives market contributed to this rally.

The midday rally in the Sensex and Nifty suggests a shift in market sentiment, potentially indicating the return of buying interest amidst diminishing FII selling pressure. Shriram Subramanian, Founder and MD of InGovern Research Services, remarked, 'This seems like a deadcat bounce amidst the continuous selling by FIIs. India is still relatively overvalued compared to other markets, notably China. However, domestic investors are likely to engage in stock-specific buying.'

In the Nifty group, 38 stocks advanced while 12 declined. Top gainers included Shriram Finance, Adani Enterprises, ICICI Bank, Mahindra & Mahindra (M&M), and IndusInd Bank, reflecting renewed investor confidence in key banking and finance stocks. Conversely, top losers were Coal India, Bharat Electronics Limited (BEL), SBI Life, Tech Mahindra, and Axis Bank. As the week progresses, traders and investors will monitor the market closely for any signs of sustained momentum, particularly with the monthly expiry approaching and continued reduction in FII selling.

(With inputs from agencies.)