Elsewhere in Asia, Japan rose 1.9%, China advanced 0.6%, Hong Kong gained 0.3%, South Korea jumped 9.6% and Taiwan rose 2.6%. “The sharp rally in the second half of the session was driven by expectations of potential de-escalation in geopolitical tensions,” said Aamar Deo Singh, senior vice president of research at Angel One.
Technical indicators were also oversold, which added to the day’s rebound. “The pullback was primarily a textbook mean-reversion event driven by deeply oversold technicals and a violent short-covering squeeze in the derivatives segment,” said Bhavya Shah, technical research analyst at Stoxbox.
Shah said based on intraday price action, the index consolidated through the first-half of the session before breaking out past 2:15 PM, which triggered cascading stop-losses for intraday bearish bets.
The Nifty India Volatility Index, or VIX-popularly known as the market’s fear gauge- cooled 15.5% to 17.86 on Thursday after rising more than 50% earlier this week. Broader market indices outperformed the benchmarks on Thursday, with Nifty Midcap 150 gaining 1.5% and Nifty Smallcap 250 rising 1.4%. Of the total 4,397 stocks traded on BSE, 2,749 advanced and 1,515 declined.
FPIs net sold shares worth ₹3,752.5 crore, while domestic institutional investors were buyers worth ₹5,153 crore.
Analysts are hesitant to conclude that the recovery is permanent. “The near-term outlook remains highly volatile with a sell-on-rise underlying bias,” said Shah. “Traders should not conflate a short squeeze with a new bull phase.”
He said traders should watch the resistance level of 24,850 on the Nifty, below which the index is likely to see a resumption of the prevailing downtrend toward 24,300.