Equities dance from despair to delight

De-escalating tensions in the Middle East, dovish comments from Federal Reserve officials, reports of a new US-China trade agreement, and signals from government officials that further trade deals were close to completion reversed the sentiment decisively last week. In the US, the S&P 500 Index and Nasdaq Composite posted gains of 3.44% and 4.25%, respectively, both closing at record highs.

The BSE Sensex rose 2% to close at 84,059, while the Nifty 50 increased 2.1% to settle at 25,638 last week. Sentiment shifted decisively by midweek following reports of a ceasefire in the Middle East. This development sparked a thorough recovery across all sectors, with benchmark indices experiencing sharp rebounds. Market appetite remained strong in the primary segment as well, with several IPOs seeing substantial oversubscription. Encouraging India PMI data provided additional momentum to the positive sentiment.

Markets in both the US and India are recovering and approaching all-time highs after the end of hostilities between Israel and Iran. This reduction in geopolitical risks, coupled with the absence of new developments in the trade war and expectations of lower capital costs, has bolstered positive market sentiment. The short-term trend of the Nifty remains positive as it stays above key short-term moving averages.

The Nifty has now entered the downward gap area of 25,640-25,740, a significant zone created on October 3rd, 2024. Any decisive close above 25,740 could push the index towards the next psychological and technical resistance at 26,000. On the downside, 25,317 now stands as a crucial immediate support level. Indian markets are expected to resume trading from where they left off on Friday, near the flat line, with activity likely to pick up in the second half of the day from institutional investors, as today marks the last day of the month and quarter.

Disclaimer : This content is only for informational purpose. It does not make any recommendation to act or invest. To get any errors corrected, write to content@hdfcsec.com.

Source: HDFC Securities Prime Research