The Indian stock market wrapped up Thursday’s session on a strong note, with benchmark indices rising sharply as investor sentiment turned optimistic. The BSE Sensex surged over 400 points, closing at 81,442, while the Nifty 50 gained around 130 points to end at 24,750. This rally was supported by broad-based buying across sectors and a sharp dip in market volatility, indicated by a more than 4% fall in the India VIX. However, despite the bullish closing, technical indicators suggest that the market may be entering a reversal zone, calling for cautious trading on Friday, June 6.
On the technical front, the Sensex has formed a reversal pattern on the daily chart. This pattern typically signifies that the ongoing trend might be weakening and could give way to a change in direction. At present, the Sensex is hovering around its 20-day Simple Moving Average (SMA), which acts as a critical level for short-term trend confirmation. Holding above this moving average could help the bulls maintain control, but any slip below may lead to increased selling pressure.
The immediate support for the Sensex is identified at the 81,000 mark. This level is expected to act as a cushion for any downward move. On the upside, the resistance lies at 81,800, a level that has proven to be a hurdle during Thursday’s intraday trading when the Sensex touched a high of 81,911 before retreating. A sustained move above this resistance could open the gates for further upside, possibly leading to new all-time highs. Conversely, a breach below 81,000 could confirm the reversal and prompt short-term corrections.
Sectoral indices also contributed positively to Thursday’s rally, with notable gains in mid-cap and small-cap stocks. This broader market participation signals that investor appetite remains strong beyond the frontline stocks. Nevertheless, as the indices approach their upper resistance limits, market participants may prefer to book profits, particularly if fresh triggers are lacking or if global cues turn adverse.
One of the key global developments that traders are closely watching is the expiration of the tariff moratorium imposed during the Trump administration, which is due to end on July 9. This policy shift could have repercussions on international trade and subsequently on equity markets worldwide, including India. Any announcements or policy changes from major economies could spark fresh volatility, and traders need to remain nimble in the face of such external risks.
Volatility itself has shown signs of calming, which usually aligns with bullish sentiment. The sharp drop in the India VIX reflects decreased hedging activity and a rise in investor confidence. However, historically, low volatility levels have often preceded sharp moves in either direction, making it imperative for investors to stay vigilant.
