Tuesday saw the Sensex and Nifty rise from a seven-month low as markets were buoyed by a halt in crude oil prices, reducing inflation, and improved optimism around the world. The rebound was further bolstered by oversold circumstances in large caps and gains in Adani group companies.
After plunging to a seven-month bottom yesterday, Indian equities markets recovered on Tuesday as domestic factors and an improvement in global risk sentiment offered some respite. A more positive perspective was influenced by reports of gradual US tariffs, a firmer rupee, and a reduction in inflation worries. Gains in Adani Group equities and indications of stability in large-cap values drove the recovery.The NSE Nifty increased 90 points, or 0.4 percent, to 23,176 at the closing, while the BSE Sensex was up 170 points, or 0.2 percent, at 76,500. Both indices had increased by as much as 0.7 percent earlier in the day.
1. Global Risk Sentiment Improves: Reports suggested that the Trump administration could raise tariffs gradually over time rather than all at once, which would lower inflationary concerns. This gave markets some relief on a global scale.
Gains were recorded by Asian stocks, especially those in China, Hong Kong, Sydney, and Taiwan. The slight rebound from Monday was maintained by US equities futures. After the index closed the day up 0.2 percent, S&P 500 futures increased by an additional 0.5 percent.
The Bloomberg Dollar Spot Index fell as much as 0.4 percent, giving emerging markets much-needed respite. The 10-year yield barely changed at 4.78 percent, while US Treasury yields stayed steady. For additional clues on Federal Reserve policy, market players are also keeping an eye on the US December Producer Price Index (PPI) data, which is scheduled for release later today.
2. Oil and rupee prices stabilize: The Indian rupee saw some rebound at open from yesterday's historic low of 86.59, but it ended the day slightly worse at 86.63. The rupee was boosted by the dollar index's softening, which gave industries that depend on imports a reprieve.
Early Tuesday trading saw a decline in oil prices, although they were still close to four-month highs. After a five-percent increase over the previous two days, Brent crude was trading close to $81 a barrel. Following recent US sanctions on Russian crude that disrupted global supply networks, Chinese and Indian importers have been looking for alternate suppliers.
3. Reducing inflation provides respite: India's retail inflation for December dropped to 5.22 percent, a four-month low, below the 5.3 percent market forecast. As a result of falling food costs and a brief decline in crude oil prices, inflation in both rural and urban areas decreased. This move, according to analysts, may help demand rebound and allow authorities to take accommodating actions.
4. Buyers are drawn to oversold markets: Market analysts noted that large-cap stocks were oversold, which sparked interest in purchasing. The bulls have regrouped as a result of Monday's steep decline in benchmark indexes. Anand James, Chief Market Strategist at Geojit Financial Services, stated, "This was expected, but there isn't much else to suggest that it's anything more than a dead cat bounce."
In a TV interview, Citi's Head of India Research, Surendra Goyal, stated that large-cap equities now provide a greater opportunity than mid- and small-cap companies because their values have returned to their five-year norms.
5. Adani stocks lead gains: The Adani group's stocks kept increasing, with Adani Enterprises and Adani Ports jumping 7% and 5%, respectively, to become the main drivers of the Nifty's advances. Adani Power jumped 19 percent, Adani Green 13 percent, and Adani Energy Solutions Ltd 12 percent, as did other group equities.
Market outlook: Continued volatility
Analysts warn that the overall market trajectory is still unclear despite Tuesday's increases. "While the Nifty and large caps may see near-term stability, some pain could continue in the mid- and small-cap segments," stated Aishvarya Dadheech, CIO of Fident Asset Management.
Short-term market mood will be largely influenced by the Union Budget, business results, and the next US PPI data. It is recommended that traders manage risk in high-beta equities by staying cautious and concentrating on large-cap possibilities.
The Nifty encounters resistance at 23,260, while 22,900–22,800 provide downside support. A "sell-on-rise" strategy is advised by analysts due to the general weakness of market movements.
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