Sensex climbs 300 pts, Nifty tops 25,300 on US trade talk progress, Fed rate cut hopes

Indian benchmark indices Sensex and Nifty traded higher on Wednesday, with financials and IT stocks driving gains, after the government described its ongoing trade negotiations with the US as “positive” and “forward-looking”. Investor sentiment was further lifted by expectations that the Federal Reserve would cut interest rates later in the day.

The S&P BSE Sensex rose 170.05 points, or 0.21%, to 82,550.74 at the open, while the NSE Nifty advanced 61.15 points, or 0.24%, to 25,300.25. At around 9:40 AM, Sensex traded 309 or 0.38% higher at 82,700, whereas Nifty50 rose 99 pts or 0.39% to 25,337.

On the 30-stock Sensex, Bharat Electronics, UltraTech Cement, Trent, Larsen & Toubro and Tata Consultancy Services were among the top gainers, advancing between 0.7% and 1.7%.

On a sectoral basis, the IT index climbed 1% and financials added 0.2%. The broader market also tracked the gains, as the Nifty Midcap 100 rose 0.3% and the Nifty Smallcap 100 gained 0.4%.

India’s commerce ministry said efforts would be stepped up to conclude a “mutually beneficial” trade agreement at the earliest.

Attention now turns to the Federal Reserve’s policy decision due after Indian market hours, with the U.S. central bank expected to deliver a 25-basis-point rate cut and flag the prospect of further easing later this year. Lower U.S. rates typically weigh on Treasury yields and the dollar, boosting the appeal of emerging markets such as India for foreign portfolio investors.

Expert Views

The ongoing rally in the market is being driven by a combination of positive sentiments and fundamentals and the market expects the renewed India-U.S. trade talks to result in an agreement, culminating in the withdrawal of the 25% penal tariffs imposed on India, said Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments, adding that if expectations translate into reality, that would be a huge sentiment positive.

“Fundamentally, the GST reform is expected to trigger an impressive demand spurt led by automobiles. Auto stocks have already rallied, discounting the expectations. White goods, particularly air conditioners, can be beneficiaries. NBFCs financing the purchase of white goods, too, have rallied. Some leading private sector banks like HDFC Bank and ICICI Bank are yet to participate in the rally. These stocks are fairly valued,” said Vijayakumar.

The Fed is expected to cut rates by 25bp tonight, said Vijayakumar, adding that more than the rate action the Fed commentary on the evolving economic outlook and the trajectory of future rate action will be closely watched by the market.

On a technical basis, despite the large rise and the push beyond the August peak, directional indicators are yet to signal momentum that is required to play the 25,400-25,0600 trajectory, said Anand James, Chief Market Strategist at Geojit Investments.

“Towards this end, the favoured view expects easing of the uptrend or a turn lower. Dips to 25090-25000 may attract bargain hunting, with nearest major support continue to be at 24700,” said James.

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