Investors are unwilling to conclude that the worst for the stock market is over, even as it appeared that they took the RBIs steps to make lending rates costlier in their stride. Analysts attributed the positive market close on Wednesday to short-covering, ahead of the expiry of June F&O contracts, in anticipation that there could be a pause in negative news flow, at least for the time being.

But, in the long run, the bias is negative, as uncertainty over the impact of the jump in interest rates on economic and corporate profit growth continues to linger. Besides, the unstable political scenario is playing on the minds of investors. Any fall in the existing government, before the scheduled elections next year, could trigger the next bout of major correction.

Immediately, investors are keenly watching the outcome of the US Fed meet on Wednesday. The Fed is widely expected to leave the benchmark interest rate at 2% in the meet, ending its series of rate cuts, but analysts do not expect the outcome to have any major impact on domestic markets. Dalpat Mehta, head-corporate resources, Sun Capital, says, For the time being, Indian markets would be moving more on the basis of local developments than any other. The hike in the interest rate locally will affect the bottomlines of many.

On Wednesday, the Sensex ended 113.49 points or 0.80% higher at 14,220.07 after plunging 375 points initially. The broader benchmark Nifty ended the day at 4252.65, up 61.55 points or 1.47%. The trend in broader market was nconclusive, as gainers edged losers 1370: 1264 on the BSE. The domestic indices also drew its strength from the positive global cues as most of the Asian and European markets were traded in the positive territory. Dow futures were trading higher on Wednesday.

Back home, foreign institutional investors (FIIs) emerged net sellers to the tune of Rs 364 crore on Wednesday, while domestic institutions bought Indian shares worth Rs 530 crore, as per provisional figures on the NSE. Technical analysts see some relief for the market in the near-term and recommend buying with a long-term perspective. Investors can start putting in money as it will be difficult to catch the bottom. Even if the market falls 5-10% at these levels, taking at least six-month horizon could give good returns. Nifty may get good support at 3950-4000, said Gurudatta Dhanokar, technical analyst and derivative strategist, Almondz Global Securities.