Is the stock market rally a case of dead cat bounce or festive cheer?

After strong September sales data reported by passenger vehicle manufacturers, banks also left analysts impressed with their quarterly business updates.

Ahead of the festive season, the Street is optimistic about retail demand across segments, said S Ranganathan, Head of Research at

, while attributing the rally to not just positive global cues but also encouraging quarterly updates on advances and collections from banks during the second quarter.

Nifty Private Bank was the top gainer among major sectoral indices on Tuesday as it rallied over 3%. The rising interest rate scenario is also expected to lead to higher net interest margins (NIMs) and attract deposits.

The rally in the global markets was triggered by an unexpected slowdown in the US Manufacturing PMI, which gave hope that the US Fed would slow the pace of policy tightening. Following suit, US bond yields fell in tandem with the US dollar.

“We expect that this move in both Bank Nifty and Nifty50 can sustain as long as the market believes that the global central banks, especially the US Fed, will be inclined to reduce/stop liquidity tightening measures. We believe that investors should buy good quality companies available at reasonable valuations in this rally and not get caught on the wrong side if the market expectations of the Fed pivot don’t hold true,” said Nishit Master, Portfolio Manager, Axis Securities PMS.

On 16 out of 22 occasions, buying on dips during September-October resulted in positive returns in Q4 of the calendar year, shows data from brokerage firm ICICIDirect.

“We expect anxiety around the global volatility would settle down in coming weeks and form a higher base paving the way to eventually head towards September 2022 high of 18,100 in coming months,” ICICIDirect research analyst Dharmesh Shah said.

He pointed out that over the past five weeks, the index has retraced merely 38.2% of last two months’ rally (15,185-18,100) while absorbing global volatility, signifying inherent strength and relative outperformance against global peers.

While the medium to long-term outlook for the overall market remains positive, we could see volatility in the short run, with the market responding in either direction, Axis Securities said.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)