Mumbai: India's equity indices gained 0.9% on Wednesday as traders covered a portion of their bearish bets in an oversold market ahead of the expiry of the January futures and options series on Thursday. Analysts said the US Federal Reserve's comments on the interest rate outlook late Wednesday and India's Union Budget on February 1 could dictate further market moves though they expect the rebound to be shortlived.The NSE Nifty climbed 0.9% or 205 points, to close at 23,163. The BSE Sensex gained 0.8%, or 631 points, to 76,532. Upsides in the broader market were stronger with the Midcap 150 index and the Smallcap 250 index surging 2.4% and 3.2%, respectively - the largest single-day gains in seven months."The rally in the markets today was on account of short covering ahead of the monthly expiry given that there was significant short buildup in both benchmark Nifty and Bank Nifty indices and the markets were in extremely oversold territory," Nilesh Jain, head of derivatives and technical research at Centrum Broking. "This was a pullback move."117712308Jain said that traders covered short bets in the last two sessions, but the rebound may not last for too long.Investors are also awaiting Fed Chairperson Jerome Powell's remarks on future interest rates after its first monetary policy meeting in 2025. This will also be the first since Donald Trump took charge as the US President. Market participants expect the American central bank to keep the fed funds rate unchanged at 4.25-4.5%.At home on Wednesday, the Nifty Realty surged 2.9% while Nifty IT and auto indices gained 2.6% and 1.5%, respectively. Bank Nifty advanced 0.6% on Wednesday while Nifty Financial Services gained 1.05%."RBI's liquidity infusion on Monday boosted investor sentiment," said Siddhartha Khemka, head of retail research, Motilal Oswal Financial Services. "Post the corrections, value buying has emerged and some large-caps have reported decent earnings, propelling the markets higher."Khemka said that sentiment in banking and financial services stocks improved after the RBI's liquidity infusion. Out of the 4,082 shares traded on the BSE, 1,032 advanced, while 2,962 declined.In the past one month, the mid-cap and small-cap indices slumped 7.6% and 11.9% respectively while benchmark indices fell around 2.7% each in the same period. Technical analysts said that momentum indicators such as Relative Strength Indicator (RSI) indicate broader markets were also oversold after correcting over 20% from their tops. “Midcap and Smallcap Indices witnessed a ‘dead cat bounce’, said Jain. “Since the rebound took place in a downtrend, investors are advised to remain cautious amid no signs of a decisive reversal.” A dead cat bounce refers to a shortterm recovery in a downward trend that doesn’t indicate a reversal of trend which implies that it may not be a sustained up-move. Foreign portfolio investors (FPIs) sold shares worth a net Rs 2,586 crore on Wednesday. Their domestic counterparts bought shares worth Rs 1,793 crore. So far in January, overseas investors sold Rs 75,300 crore. Elsewhere in Asia, markets remained closed in China, Taiwan, Hong Kong and South Korea on account of the Lunar Year. Japan advanced 0.75% while Indonesia moved 0.92% downAnalysts said hopes are pinned on the budget as investors are hoping for some measures from the government to reverse the growth slowdown. “The market has a lot of hope around the Budget; if it delivers on these expectations no major change is expected as it is already discounted,” said Khemka. “However, if it falls short, then there could be a downside.” “Any positive surprise in the Budget could drive benchmark Nifty towards 23,800 levels but the gains are expected to be sold into,” said Jain. “Overall, the index could oscillate between 22,500 and 24,000 levels.”