Indian benchmark indices extended their recovery on Tuesday, October 6, after Monday’s gains ended an eight-week losing streak. Around 9:50 AM, the Sensex was up 0.34% at 72,630, while the Nifty 50 gained 0.35% to 22,636. Banking stocks and strong quarterly business updates were the key factors that led the gains, although elevated US bond yields and continued FII selling capped the upside.

1. RBI Policy Decision in Focus

The biggest domestic trigger is the RBI’s monetary policy decision due on Wednesday. Markets are largely expecting a 25-basis-point repo rate hike from 5.25% to 5.5%, which would be the first rate increase since February 2023. The possibility of a larger hike has also been discussed as inflation pressures have started to build again. Investors are therefore positioning cautiously ahead of the announcement.

2. Banking Stocks Lead the Recovery

Banking and financial stocks are providing strong support to the benchmarks. Axis Bank and Kotak Mahindra Bank gained after reporting improvements in quarterly advances and deposits. Bank Nifty was also trading higher, helping the broader market recover. Strong Q2 business updates are encouraging stock-specific buying despite the broader macroeconomic concerns.

3. Positive Global Cues Support Sentiment

Asian markets traded higher after Wall Street’s strong performance. The Nasdaq closed at a record high, while US equities benefited from continued strength in technology stocks. The positive global setup has improved risk appetite and helped Indian equities extend Monday’s rebound. However, gains remain limited because US Treasury yields are still at multi-decade highs.

4. Crude Oil Eases Towards $100

Brent crude was trading around $100-$101 a barrel after falling nearly 2% in the previous session. Increased Middle East oil exports and G7 efforts to boost emergency supplies have eased immediate concerns about global supply. Lower crude is positive for India because it can reduce pressure on the import bill, inflation and the rupee.

5. FII Selling Remains a Headwind

Foreign investors continued to sell Indian equities, with FII outflows of Rs 4,699 crore on Monday. In contrast, domestic institutional investors bought Rs 5,182 crore, helping absorb some of the foreign selling. The continued FII outflow remains a key risk, particularly as the rupee remains close to record-low levels.

Key Technical Analysis

Sensex Technical Outlook

The Sensex is attempting to build on Monday’s recovery and was trading around 72,630 in morning trade. The 72,000-72,200 zone remains an important support area, while 72,800-73,000 is the immediate resistance zone. A sustained move above 73,000 could strengthen the recovery, but the broader trend remains cautious until the index crosses key moving averages.

Nifty 50 Technical Outlook

Nifty is holding above 22,600, which is encouraging after last week’s sharp correction. Immediate resistance is placed at 22,800, followed by the psychological 23,000 mark. On the downside, 22,400 is the first important support, followed by 22,217. A sustained move above 22,800 would provide stronger confirmation of a short-term recovery.

Bank Nifty Technical Outlook

Bank Nifty is benefiting from buying in financial stocks and needs to sustain above 55,000 to strengthen its recovery. Support is placed around 54,400 and 54,000, while 55,000-55,500 remains the key resistance zone. A decisive breakout above 55,500 could improve sentiment, although the RBI decision remains the major near-term trigger.

Today’s Key Takeaway

The market is gaining for a second straight session as banking stocks, positive global cues and softer crude prices improve sentiment. However, the recovery remains fragile because of persistent FII selling, a weak rupee and elevated US Treasury yields. The RBI policy decision on Wednesday will be the biggest near-term trigger, while Nifty’s ability to sustain above 22,600-22,800 will be crucial.

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