Stock market today: As Nifty regains some of Mondays losses, HDFC Securities, says some evidence of comeback of bulls

Indian benchmark equity indices regained some of the previous session losses today, at close the Nifty was up 121.60 points or 1.03% at 11,889.40. In the process the Indian markets outperformed all the other Asian markets. Possible fund inflows due to the MSCI rejig kept the sentiments buoyant in India.
 
Morgan Stanley expects MSCI India to see passive inflows worth $2.5 billion, and its weight in MSCI Emerging Market to increase to 8.7% from 8.1%. Also as per UBS and State Street Global, Indian stocks provide a good hedge in portfolios ahead of the U.S. presidential election, thanks to a domestically oriented economy.
 
Volumes on the NSE were higher than recent averages. Banks, Pharma and FMCG were the sectors that gained the most while IT and PSU bank indices lost the most.
 
Shares slipped in Asia on Tuesday due to surging coronavirus cases and waning hopes for U.S. economic stimulus. Data out of Asia was mixed with South Korea’s relatively strong showing which reflected a better than expected 1.9% economic growth in the last quarter, following a 3.2% quarterly decline in April-June. China's industrial firms rose at a slower pace in September, hurt by factory-gate deflation and rising raw materials costs.
 
The next band of resistance for the Nifty is 11942-11975. Negative advance decline ratio suggests caution in the broader market and possibility that the positive sentiments arising out of MSCI rejig may not last long. 
 
After showing a sharp weakness on Monday, the Nifty witnessed an excellent comeback on Tuesday and closed the day decently higher by 121 points. After opening on a slightly positive note on Tuesday, Nifty slipped into minor weakness soon after the opening. A sustainable up move has emerged from an early part, which lasted till the later part of the session. Intraday minor consolidations have given a buy on small dips opportunity.
 
A reasonable positive candle was formed on Tuesday that was placed just beside the long negative candle of Monday. Technically, this pattern signals a smart comeback of bulls from the lower levels. In the last few occasions, the formation of such long bear candles have failed to show any reasonable follow through declines after its formation.
 
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Hence, the upside bounce of Tuesday after a long negative candle of the previous session could mean a possibility of more upside in the market. This signals an inherent strength of bulls below the key overhead resistance of 12K mark. Such repeated actions below this hurdle could eventually open doors for a decisive upside movement above the 12000 mark in the near term.
 
The important long support is intact for the market as per weekly timeframe chart around 11650-11600 levels (intermediate trend line, as per the concept of change polarity). Nifty is currently placed in a range movement on the weekly chart.
 
Conclusion: The upside bounce of Tuesday could be another evidence of comeback of bulls after a sharp weakness. As happened in the past, one may expect further upside in the market for the short term and possible retest of the 12000 mark in the next few sessions. Immediate support is placed at 11710 levels.