Stock market indices Sensex and Nifty were trading higher in Thursday's trade, in a relief for investors, following a six-day decline. The rise was seen, as the rupee appreciated further, ahead of the PM Narendra Modi's meeting with the US President Donald Trump. A fall in inflation raised hopes of more RBI rate cuts ahead. The stock market also looked oversold and some recovery was in the offing, analysts said.
Sensex climbed 457.60 points, or 0.60 per cent, to 76,628.68. Nifty stood at 23,195.60, up 150.35 points or 0.65 per cent.
Modi-Trump meet, oversold market "Prime Minister Modi’s visit to the US would be a key monitorable. Focus should be on accumulating quality stocks on dips backed by strong earnings," said ICICI Securities.
Since the market has been oversold territory, a few triggers can ignite a rally, said VK Vijayakumar of Geojit Financial Services:
"The Indian market is in highly oversold territory and, therefore, is likely to rally on positive news expected from the Trump-Modi talks today. Some agreement is likely between the US and India on reciprocal tariffs. A positive domestic trigger is the better-than-expected decline in CPI inflation in January to 4.31 per cent from 5.22 per cent in December 2024," he said.
Easing Inflation Radhika Rao of DBS Bank said a softening inflation prints back the central bank MPC’s move to lower rates earlier in the month, with headline prints expected to head to and below the midpoint of the target over the next 2-3 months. Monetary policy would remain focused on the domestic growth-inflation trade-off at this juncture, while addressing rupee depreciation risks via intervention efforts, she said.
"This augurs well for the stock market in general and rate-sensitives in particular. From the market perspective, the elephant in the room continues to be the sustained FII selling which is showing no signs of abating," Vijayakumar said.
RBI intervention Nomura India noted that the RBI may have significantly intervened on February 10 and 11 February to strengthen rupee. The brokerage said it is not too concerned with the RBI’s ability to manage INR, due to its high FX reserve adequacy at 240 per cent, as well as authorities’ ability to secure external sources of financing, if needed. A strengthening of rupee may increase take home returns for FPIs and, thus, could halt recent massive foreign outflows. On Thursday, the Rupee was quoting 14 paise higher at 86.81 against dollar in early trade.
While not in the direct line of fire, India faces significant exposure in this trade tension. India's weighted average effective tariff on US exports stands at 9.5 per cent versus 3 per cent on Indian exports to the US, making it particularly vulnerable to reciprocal tariffs, said Subho Moulik, Founder & CEO at Appreciate.
"India is taking proactive measures to avoid confrontation. Reports suggest the government is considering reducing tariffs on over 30 items, including luxury vehicles, solar cells, and chemicals. Prime Minister Modi's US visit may also lead to discussions on a "mini" trade deal, potentially easing tensions. As US-China tensions rise, India's manufacturing sector stands to gain," Moulik said.
Technical reversal Aakash Shah, Technical Research Analyst at Choice Broking said Nifty experienced a sharp intraday swing yesterday, initially declining by nearly 270 points before staging a strong recovery of 340 points. This price action resulted in the formation of an indecisive Doji candlestick on the daily chart and signalled a potential reversal in sentiment.
"If Nifty sustains above the 23,180 level, it could extend gains toward the 23,260–23,500 range. On the downside, immediate support is placed at 22,950 and 22,775, which may present attractive buying opportunities for traders," he said.