Sensex Surges 800 Points in One Hour Amid Sharp Short Covering Activity

Market Rebounds as Sensex Surges 1%

The benchmark index Sensex bounced back from its early losses on June 2, driven by short covering on the expiry of the Nifty 50's weekly derivatives contract. Analysts attributed the positive sentiment to investors buying back shares to close out open short positions, which triggered a rapid upward price surge in the market.

At 12:35 pm on June 2, Sensex was trading at 73,999.17, but within the next hour, the index rose 800 points to trade at 74,807, representing over 1% gains for the benchmark. The rebound was primarily driven by buying in heavyweight stocks across sectors, despite persistent geopolitical uncertainty in the Middle East and continued foreign institutional selling.

The recovery was also supported by short covering ahead of the weekly expiry, which provided further sentiment boost and accelerated the recovery in the latter half of the session. Sectoral participation remained positive, with the IT sector extending its rebound and surging 4.33%. Other sectors, including auto, FMCG, and realty, also contributed to the recovery.

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The broader markets traded with a mixed bias but ended higher, with gains ranging between 0.25% and 0.41%. The benchmark Nifty 50 rose 0.43% to 23,483.55 on June 2, while the BSE Sensex gained 0.52% to 74,649.84.

The rebound in the market was a welcome respite from the nearly 3% slide over the previous four sessions, which was driven by Iran war jitters and unprecedented foreign outflows. However, ongoing geopolitical uncertainties continue to keep investors' sentiment cautious.

Market analysts remain cautious about the market's trend, with the RSI continuing to remain in a bearish crossover, indicating weak momentum. The index is also trading below the 20-day EMA on the daily timeframe, reinforcing the negative bias. Immediate support is placed at 23,420, and a breach below this level could trigger another decline towards 23,200. On the upside, resistance is positioned around 23,600.

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