Indian markets buoyant on hopes of an early resolution of US tariff concerns

Major U.S. indices declined as investors rotated away from highflying technology shares, driven by concerns over AI sustainability and stretched valuations. AI leaders, including Nvidia (-2.8%), AMD (-3%), and Palantir, extended losses, while Intel plunged 7% amid speculation about potential government equity stakes.

Capital flowed into defensive sectors—energy, healthcare, and consumer staples—which outperformed as investors sought safety ahead of Federal Reserve decisions and amid inflation concerns tied to potential tariffs.

Technology stocks faced particular pressure following a critical MIT report questioning AI profitability. The study found 95% of organizations achieving “zero return” on AI investments, challenging the hype that has driven Wall Street gains this year. The timing proves significant, coming one week before Nvidia’s quarterly earnings—a closely watched bellwether for the AI industry. The scepticism intensified after OpenAI CEO Sam Altman warned of a potential AI bubble forming in the sector.

Markets trimmed rate cut expectations following the release of the minutes of the August meeting. The minutes showed most board members believed “inflation risk outweighed employment risk,” with several officials noting the current rate “may not be far above neutral.

Fed fund futures now price an 80.6% probability of a 25 basis point September cut, down from yesterday’s 84.4%, according to CME FedWatch.

Markets remain fixated on the Federal Reserve’s Jackson Hole symposium, with investors awaiting Chair Powell’s Friday speech for signals on a September rate cut.

Powell’s Friday address at Jackson Hole will provide crucial policy guidance, following July’s softer inflation and employment data that had bolstered rate cut expectations.

Oil prices held gains after US crude stockpiles declined the most since mid-June, keeping inventories well below the seasonal average. WTI traded near $63 a barrel after rising more than 1% on Wednesday. Brent closed below $67.

The Nifty rose for its fifth consecutive session yesterday, gaining 69 points (0.28%) to close at 25050. Nifty closed above 25000 for the first time since 24th July 2025.

The current rally, which has seen the Nifty gain over 750 points from its recent swing low of 24,337, has now retraced more than 50% of the entire fall from the high of 25,669. The resistance levels for the Nifty are now placed at 25,160 (61.8% retracement of the fall) and 25,355 (76.4% retracement). On the downside, the support for the Nifty has now shifted up to 24,852.

Indian markets are expected to open with modest gains today, buoyed by hopes for an early resolution to US tariff concerns.

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Source: HDFC Securities Prime Research