The markets staged a strong recovery on Thursday, with the Sensex recording its fourth largest gain ever, firming up by 469.60 points, or 3.73 per cent. The NSE Nifty too gained 134.80 points to end at 3,761.65.
It is, however, too early to be optimistic about the future. This bounce-back could well be a temporary upswing due to a demand-supply mismatch caused by the recent slide in the market, said market analysts. At such times those eager to enter the market at the low levels they have fallen to, offer higher prices to people who have incurred losses — to induce them to sell their shares. Consequently, the market starts going up and the process is further fuelled by short covering.
"This is purely a short squeeze and may extend to 3,900-levels on the Nifty. But aggressive buying is not recommended till the markets consolidate," said Vijay Bhambwani, a technical analyst.