Sensex, Nifty 50 trade volatile with resilience. Is this a signal for trend reversal?

Mint

2 days ago

Indian stock market benchmarks Sensex and Nifty 50 remained volatile on Tuesday, August 11, following a sharp rally in the previous session that snapped a six-week losing streak. The rebound was powered by value buying, short covering, and selective gains in large-cap stocks.
Two major global developments acted as catalysts for the Indian stock market. First, hopes of progress in the Russia–Ukraine conflict rose after US President Donald Trump announced a planned meeting with Russian President Vladimir Putin on August 15.
Second, Washington and Beijing extended their tariff truce for 90 days, deferring higher duties until November 10 and easing near-term trade tensions.
While these factors buoyed market mood, underlying domestic headwinds — including muted Q1FY26 earnings growth, persistent foreign investor outflows, and macroeconomic uncertainties — continue to cast a shadow.
Market experts are cautious in interpreting the rally as a structural turnaround. The consensus view is that current gains reflect a relief rally rather than a definitive trend reversal.
According to Pranay Aggarwal, Director and CEO at Stoxkart, the recent upmove appears more like a relief rally as the absence of broad-based participation across sectors and the inability of indices to break above key resistance levels underscore the market's fragility.
'Macro headwinds like persistent inflationary pressures in developed markets, crude volatility, and cautious FII flows remain,' said Aggarwal. Sustained higher highs over multiple sessions, along with improving breadth and volumes, he adds, would be necessary before calling it a structural reversal.
Technical indicators also remain mixed. Nifty 50 has held the 24,400 support level for three consecutive sessions, forming a tweezer bottom pattern — a potential short-term bullish signal — but the index continues to consolidate within a range, notes Trivesh D, COO of Tradejini.
'Market seems to have temporarily absorbed the tariff concerns and is turning focus to earnings cues priced in, but a clearer trajectory may only emerge after the tariff truce period ends and any new measures are known' he said.
Adding to the caution, Mayank Jain, Market Analyst at Share.Market, also said that the Indian stock market's rebound looks more like a short-term relief rally than a clear trend reversal. He points out that both Sensex and Nifty 50 remain below their 20-day and 50-day moving averages, a sign of lingering weakness. In his view, a breakout above 25,000 on the Nifty, supported by stronger earnings and better global cues, would be required to declare a genuine reversal.
'Some sectors have posted better-than-expected Q1 results, giving sentiment a brief boost. But foreign investor outflows, a weaker rupee, and uncertainty around global trade talks are still weighing on the market,' said Jain.
The recent market correction and Q1 results have highlighted sectoral divergence, creating selective opportunities for investors.
'Domestic growth stories remain resilient. Consumption-led sectors such as retail, alcohol, FMCG, and footwear reported strong year-on-year profit growth in Q1, aided by urbanisation, premiumisation, and steady middle-class demand. The Nifty FMCG index has outperformed the broader market in recent weeks, reflecting this relative strength,' Jain added.
Financials are leading on fundamentals. According to Jain, banks, diversified NBFCs, and insurers posted broad-based profit growth, driven by healthy loan disbursements, stable margins, and deeper penetration of financial products. Their largely domestic focus has shielded them from global trade volatility, allowing them to outperform cyclicals.
Selective export-oriented plays are emerging. Diamonds, jewellery, and specialty chemicals saw robust earnings on the back of recovering overseas demand, though other export-linked sectors such as textiles remain under pressure from weak global orders, tariff risks, and supply chain constraints.
Policy-driven sectors are attracting interest. Analysts highlight opportunities in Banking & Financials, Capital Goods, mid-tier IT, and Pharma — particularly among companies with strong balance sheets. Cement, oil & gas, and utilities have also drawn attention after strong Q1 results, while the renewable energy value chain within the power sector continues to benefit from government incentives.
'It is more about connecting the dots than picking outright winners,' said Trivesh D.
Sectors like cement, oil and gas, and utilities delivered strong Q1 numbers, which keeps them in focus. Midcaps in industrials, healthcare, and NBFCs are drawing attention for long-term potential, even as valuations have cooled. There is also emerging value in logistics and pharma, partly due to tariff-linked positioning, he added.
'The power space, especially renewables, is benefiting from policy push and offers opportunities across the green energy chain,' noted Trivesh D.
Pranay Aggarwal also finds selective value in the Banking and Financials, Capital Goods, mid-tier IT, and Pharma sectors, particularly by focusing on companies with strong balance sheets and clear earnings visibility.
The near-term market trajectory will hinge on whether global optimism from the US–China tariff truce and geopolitical diplomacy can offset domestic challenges. Technical resilience at key support levels, coupled with selective sector strength, offers some comfort to investors.
However, until the indices reclaim major moving averages and breach critical resistance levels, the current uptrend will likely be treated as a relief rally rather than the start of a new bull phase.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.