Early signs of Thaw in India-US Ties to Lift Market Sentiment

Indian markets posted modest gains in the past week, with the benchmark indices Sensex and Nifty recovering from the losses incurred in the previous week.

US markets reached new highs this week, with the S&P 500 setting fresh records. Technology stocks drove gains as investors processed weak employment data ahead of the August jobs report.

US equities declined marginally on Friday after August payrolls added only 22,000 jobs far below forecasts  signalling a cooling of the labour market. The unemployment rate edged higher to 4.3%, while wage growth moderated, with average hourly earnings rising 3.7%, in line with projections.

Following softer payroll data, US rate cut expectations have strengthened, with markets pricing a high probability of a Fed reduction on September 17th.

US Treasury yields plunged, with the 10-year reaching April lows amid surging rate-cut expectations.

On the tariffs, President Trump signed an executive order granting tariff exemptions to trading partners that negotiate agreements on industrial exports. The exemptions apply to goods not sufficiently produced domestically, including nickel, gold, pharmaceutical compounds, and chemicals.

Japanese equities gained as investors digested Prime Minister Shigeru Ishiba’s weekend resignation announcement and awaited key regional economic data. China’s August trade figures will be closely watched by market participants today.

Indian markets are poised to recover this week, supported by buoyant global cues and expectations of lower U.S. rates, which are expected to boost global risk assets. Additionally, positive sentiment from the GST rate cuts is likely to provide further momentum.

Donald Trump softened his stance by emphasising his strong personal bond with PM Modi, calling their relationship “special”. Prime Minister Modi was quick to respond, affirming that he “fully reciprocates” Trump’s positive sentiments, highlighting the forward-looking nature of the India-US partnership. These warm personal exchanges hint at a possibility of an early thaw in relations on key trade and geopolitical issues.

The short-term trend for the Nifty has turned bullish, with a sustained move above 25,000 likely confirming a trend reversal and triggering further short covering in the index. On the downside, a level around 24500 would continue to serve as support

Source: HDFC Securities Prime Weekly, 8 Sept 2025

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