The Indian stock market is poised for a cautious opening as the Sensex and Nifty 50 indices react to mixed global cues. This uncertainty comes in light of hawkish comments made by US Federal Reserve Chairman Jerome Powell, which have created ripples across international markets.
Global Market Overview
Asian markets displayed a mixed performance, following the trend set by the US stock market, which concluded on a high note, with the S&P 500 and the Dow Jones both reaching all-time closing highs.
Market Sentiment and Fed Expectations
Traders are confident that the Federal Reserve will implement another cut during its next policy meeting in November. However, expectations for a 50 basis-point reduction have dropped significantly, now standing at 35.4%, a decrease from 53.3% just a day prior, according to CME Group’s FedWatch Tool.
Indian Markets Recap
On Monday, the Indian stock market indices experienced a decline of over one percent, a trend influenced by weak signals from global markets.
The Sensex plummeted by 1,272.07 points (1.49%), closing at 84,299.78, while the Nifty 50 fell by 368.10 points (1.41%) to finish at 25,810.85. This decline was primarily a reaction to the fluctuation in global market sentiments.
Market Outlook
Siddhartha Khemka, Head of Research at Motilal Oswal Financial Services Ltd., suggests that the market may consolidate in the near term after recent one-sided trends. Looking ahead, the upcoming Q2 FY25 earnings results are expected to steer the market direction, along with global indications. Focus may shift towards the IT and Banking sectors as companies gear up for their pre-quarterly updates this week, with the Auto sector also anticipated to draw attention as OEMs release their monthly sales data.
Key Global Market Cues
To better understand the Indian stock market’s possible direction today, here are some key global cues:
Asian Markets Performance
Asian markets showed a varied response on Monday, particularly after suggestions from Chairman Powell hinted at smaller interest rate cuts down the line. Japan’s Nikkei 225 rebounded, gaining 1.07% after a significant drop of 4.8% in the previous trading session, while the Topix index also rose by 0.88%. Notably, markets in South Korea, Hong Kong, and mainland China were closed during this period.
Gift Nifty Analysis
Gift Nifty is trading around the 26,000 level, showing a premium of nearly 10 points over the previous close of Nifty futures. This suggests a likely flat start for the Indian stock market indices.
Wall Street Insights
The US stock market concluded positively on Monday, with both the S&P 500 and Dow Jones reaching record closing levels. The Dow Jones Industrial Average saw a modest increase of 17.15 points (0.04%) to close at 42,330.15, while the S&P 500 rose by 24.31 points (0.42%) to reach 5,762.48. The Nasdaq Composite similarly advanced by 69.58 points (0.38%) to finish at 18,189.17.
Quarterly Performance
In terms of monthly performance, the S&P 500 recorded a 2% increase, marking its fifth consecutive month of growth. For the quarter, the S&P 500 rose by 5.5%, while the Nasdaq and Dow marked increases of 2.6% and 8.2%, respectively.
Federal Reserve’s Policy Outlook
Chair Jerome Powell’s recent statements reflect the Fed’s strategy to maintain a gradual approach to rate cuts, emphasizing that there is no immediate urgency to expedite reductions. This measured approach aims to align inflation with the target rate of 2% while ensuring a stable unemployment rate.
SEBI Board Developments
In regulatory news, the SEBI board has recently approved 17 proposals, including the introduction of a new asset class aimed at high-risk investors, adjustments in the regulatory framework for passively managed mutual funds, and changes to insider trading regulations.
Economic Indicators
India’s fiscal deficit for the April-August period is reported at ₹4.35 lakh crore, which accounts for 27% of the budgeted estimate for FY25. This figure indicates a decrease compared to ₹6.43 lakh crore recorded in the same timeframe last year. Additionally, the current account deficit (CAD) widened to 1.1% of GDP, equating to $9.7 billion in the first quarter of FY25, transitioning from a surplus situation observed previous quarter.
Financial Market Performance
The U.S. dollar has strengthened against major currencies as of Tuesday, with the dollar index increasing by 0.07% to 100.85, following a rise of 0.3% on Monday. Furthermore, the US two-year Treasury yield and other maturity yields have also seen upward movement, indicating a response to the ongoing economic data releases.
Commodity Market Review
Gold prices remained stable after a nearly 1% drop in the previous session, with spot gold holding at $2,635.89 per ounce. Meanwhile, US gold futures edged down 0.1% to $2,657.50.
(With inputs from various sources)
Disclaimer: The insights and recommendations presented here reflect individual analysts’ opinions and do not represent a consensus from our publication. Investors are encouraged to consult with certified professionals before making any investment decisions.
