Market Rebound: What's Driving the Rally?

StockEdge's Morning Market Analysis -6th March

The Nifty gained 254 points over the day to close at 22,337, with the bulls in complete control. The index opened at the low and closed at its high of the day.

Despite weakness in US markets, the Indian market opened with a strong gap-up and extended gains throughout the day. What stood out was the broad-based participation across market caps, with the Small-cap index surging 3% in a single session—the strongest in weeks.

Key Market Drivers:

Dollar Index Weakness – A sharp drop to 104.1 eased global pressures and fueled the rally.

Extreme Oversold Conditions – Indicators like RSI and MACD showed deeply oversold levels, leading to a technical bounce from key support at 21,800.

US Market Recovery – A strong overnight session boosted sentiment despite recent struggles.

Technical View – More Upside in Sight?

The bulls have shown resilience in the last two sessions. While US markets wavered, Indian indices rebounded sharply, signaling a pause in bearish momentum and validation of major support levels.

?? Key Resistance Levels: 22,500 and 22,800 – These levels serve as critical hurdles, with 22,500 aligning with moving averages and a previous gap, while 22,800 marks the pivot where momentum accelerated on the downside. ?? Key Support: 21,800 remains a crucial pivot that has triggered the recent pullback.

It remains uncertain whether this is a short-term relief rally or a more sustainable bottom. Market behavior around key resistance levels will shape the next trend. Some Midcap and Smallcap stocks appear to have bottomed, offering fresh opportunities.

Sector to Watch: Metals Show Strength

The Metal index has shown relative strength, trading above key moving averages, making it a sector worth monitoring.

Overall Market Outlook & Trading Approach

The market rebound is here, led by Midcaps and Smallcaps, signaling renewed investor confidence. While the short-term trend is positive, traders should remain cautious as the index approaches key resistance levels at 22,500 and 22,800.

How to Approach This Market?

?? Traders: Ride the momentum but trail stop-losses as the index nears resistance.

?? Investors: Focus on quality Mid and Small-cap stocks that have seen deep corrections but are now showing strong reversals.

"The market is like a pendulum. It swings between optimism and pessimism, and the key is to stay disciplined and stick to the trend."

The coming sessions will determine whether this rally has more legs or is just a relief bounce. Stay alert and adaptable.

Nifty Levels:

?? Support: 22,300, 22,200 ?? Resistance: 22,500, 22,800

Bank Nifty Levels:

?? Support: 48,400, 48,200 ?? Resistance: 48,620, 48,830