Sensex rises 800 pts from day's low, Nifty above 22,650: Key factors behind sharp market reversal

1) Value buying: Investors bought beaten-down stocks at lower levels after four consecutive sessions of losses. The domestic markets ended lower last week, with rising crude oil prices amid tensions in West Asia raising concerns over inflation and corporate earnings. The Nifty declined 2.4 percent during the week, while the Sensex lost 2.2 percent. 2) Easing crude oil prices: Brent crude futures traded around USD 114.5 per barrel, easing from a near six-month high of USD 117 after the Indian market closed on Friday.

However, ongoing attacks on Saudi Arabia by Yemen's Houthis kept concerns over oil supplies in focus. 3) FII buying: Foreign institutional investors (FIIs) bought equities worth Rs 887.65 crore on Friday. Foreign investors have withdrawn Rs 48,056 crore from Indian equities so far in October. However, selling by foreign portfolio investors (FPIs) moderated significantly last week, with overseas investors turning net buyers on two trading days.

4) Firm global cues: Asian markets traded on a positive note, with Hong Kong's Hang Seng index in positive territory. US stock futures also traded higher, indicating a firm start for Wall Street equities. Among ​stocks, Kotak Mahindra Bank gained more than 2 percent after second-quarter profit beat on robust loan ⁠demand and ​lower bad-loan provisions. Shriram ⁠Finance fell 5 percent after cutting its annual loan-growth forecast and flagging higher credit costs.

Ponmudi R, CEO of Enrich Money, said "Nifty opened on a lower note near the 22,524 mark and continues to face sustained selling pressure, reflecting a deterioration in the near-term technical structure. The 22,400–22,300 zone represents the immediate support band, and a sustained breakdown below this range could accelerate the downside towards the 22,200–22,000 zone." "On the upside, 22,600 now acts as the immediate resistance, followed by a stronger hurdle at 22,800.

Unless the index reclaims these levels, the prevailing bearish momentum is likely to persist. Momentum indicators have weakened considerably, with the RSI slipping to 39, indicating strong selling pressure and a bearish near-term bias," he added.