The stock market indices Sensex and Nifty were trading higher on Thursday, providing relief to investors after a six-day decline. The rise occurred as the rupee appreciated further ahead of Prime Minister Narendra Modi's meeting with US President Donald Trump. Inflationary pressures have fallen, raising the prospect of further RBI rate cuts. According to analysts, the stock market appeared to be oversold, and a recovery was on its way.
The Sensex rose 457.60 points, or 0.60 percent, to 76,628.68. The Nifty stood at 23,195.60, up 150.35 points or 0.65%.
Modi and Trump meet, oversold market
Close attention would be paid to Prime Minister Modi's trip to the US. ICICI Securities advises buying high-quality stocks during declines that are bolstered by robust earnings.
According to VK Vijayakumar of Geojit Financial Services, a few triggers can start a rally because the market has been oversold.
"The Indian market is heavily oversold and is therefore likely to rally on the positive news expected from the Trump-Modi talks today. The United States and India are likely to reach an agreement on reciprocal tariffs. A positive domestic trigger is the better-than-expected decrease in CPI inflation in January to 4.31 percent from 5.22 percent in December 2024," he said.
Easing inflation
According to Radhika Rao of DBS Bank, softening inflation prints support the central bank MPC's decision to lower rates earlier this month, with headline prints expected to fall to and below the midpoint of the target over the next 2-3 months.
At this point, monetary policy would continue to focus on the domestic growth-inflation trade-off, while intervening to address rupee depreciation risks, she stated.
"This bodes well for the stock market in general, and rate-sensitive securities in particular. From a market standpoint, the elephant in the room remains the ongoing FII selling, which shows no signs of abating," Vijayakumar stated.
RBI intervention
Nomura India observed that the RBI may have intervened significantly on February 10 and 11 to strengthen the rupee. The brokerage is not concerned about the RBI's ability to manage the INR, citing its high FX reserve adequacy of 240% and the authorities' ability to secure external financing if necessary.
A strengthening rupee may increase take-home returns for FPIs, potentially halting recent massive foreign outflows. In early trading on Thursday, the rupee was 14 paise higher against the dollar at 86.81.
While India is not directly involved in the trade war, it is heavily impacted. India's weighted average effective tariff on US exports is 9.5%, compared to 3% on Indian exports to the US, making it especially vulnerable to reciprocal tariffs, according to Subho Moulik, Founder and CEO of Appreciate.
"India is taking proactive steps to avoid confrontation. According to reports, the government is considering reducing tariffs on more than 30 items, including luxury vehicles, solar cells, and chemicals.
A "mini" trade agreement could be discussed during Prime Minister Modi's visit to the US, which could reduce tensions. "As US-China tensions rise, India's manufacturing sector stands to benefit," Moulik stated.
Technical reversal
Aakash Shah, a technical research analyst at Choice Broking, claims that yesterday's intraday Nifty swing was quite dramatic, dropping almost 270 points before rising 340 points. On the daily chart, this price action produced an indecisive Doji candlestick that suggested a possible change in sentiment.
"The Nifty may continue to rise to the 23,260–23,500 range if it maintains its position above 23,180. "Traders may find appealing buying opportunities at 22,950 and 22,775, which are immediate supports on the downside," he said.
