Bear squeeze in options Street may set stage for gains

The festival of lights appears to be setting the stage for the Indian stock markets to come alive.

- Ram Sahgal

Market experts see a possible revival following a combination of fiscal and monetary stimuli, which could boost earnings growth, and rising hopes of a US trade deal sometime in November.

Subject to no fresh negative surprises from the US administration, the market is likely to test its June-end high of 25,669.30 from Friday's closing of 24,894.25-a 3% rallyby or before the Diwali week, which runs from 18-23 October, the experts said.

They cited a recent short squeeze in the options market where almost ₹5.5 trillion worth of bearish bets were closed out in a matter of days, preceding the latest meeting of the Reserve Bank of India's monetary policy committee (MPC) that concluded on 1 October.

A short squeeze refers to bears being forced to close out their sell or short positions by buying them back due to a sudden rise in prices. This buying action further boosts share prices.