Indian Market Analyzed: Key Developments and Trends

Indian stock market indices, including the Sensex and Nifty, experienced a positive trend on Friday, partially recovering from a weekly decline. The Sensex rose by 450 points, and the Nifty gained 148 points. However, both indices still logged a 0.5% weekly loss. This highlights ongoing challenges with persistent profit-booking.

Key Points

• Fed cut rates, signaled a pause for further easing.
• Rupee weakened due to trade tensions and FPI outflows.
• Auto, metals, and realty sectors led gains this week.
• Foreign Portfolio Investors (FPIs) sold ₹1.6 trillion in equities.
• Trade negotiations with the US added to market volatility.
• Nifty’s recovery hinges on sustained above 25,950 levels.

The US Federal Reserve’s decision to cut its overnight lending rate by 25 basis points was a significant factor. Importantly, the Fed indicated it would “carefully assess incoming data” before considering more rate reductions. This cautious approach tempered expectations of a rapid global economic easing and ultimately improved investor sentiment.

Despite the positive signal from the Fed, the Indian rupee continued to face pressure. Concerns about a potential trade deal with the United States and the ongoing selling of equities by FPIs pushed the rupee to a new low. This devaluation adds to the overall economic challenges faced by Indian markets.

Trade tensions between India and the United States, specifically regarding tariffs imposed by Washington, contributed to increased volatility. Discussions between Prime Minister Narendra Modi and US President Donald Trump aimed at addressing these concerns further underscore the market’s sensitivity to global trade dynamics.

Sector-wise, the auto, metals, consumer durables, and realty sectors led the gains, benefiting from the improved risk appetite fueled by the Fed’s decision. However, sectors like FMCG and PSU banks underperformed. Analyst opinions consistently emphasized a stock-specific approach, favoring sectors like banking, auto, metals and pharma.

“Global risk appetite improved after the US Fed rate cut, boosting liquidity optimism and lifting domestic equities despite the rupee hitting record lows and continued FPI outflows,” stated Vinod Nair of Geojit Financial Services. Market breadth was strong, reflecting a broader recovery trend.

Ajit Mishra of Religare Broking advised investors to focus on specific stocks, particularly within the banking, auto, metal and pharma sectors, while selectively exploring opportunities in other sectors.

“The key to sustained recovery lies in the Nifty’s ability to maintain momentum above the 25,950 level,” said Ajit Mishra.