Indian Markets Gain on Trade Deals; Analysts Urge Buy-the-Dip Strategy

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AuthorAarav Shah|Published at:
Indian Markets Gain on Trade Deals; Analysts Urge Buy-the-Dip Strategy
Overview

Indian equities have climbed over 5% in the past fortnight, driven by progress on free trade agreements with the European Union and the United States. Despite a budget day dip due to a securities transaction tax hike, the Sensex and Nifty 50 are trading higher. Analysts suggest most positives are now priced in, advising investors to hold existing positions and accumulate stocks on market corrections for long-term value.

Trade Deal Catalysts Drive Market Rally

Indian stock markets have demonstrated resilience, posting gains exceeding 5% for both the Sensex and Nifty 50 from their February 1 lows. This upward momentum, despite an initial dip following the budget announcement's securities transaction tax (STT) increase on futures and options, was largely propelled by positive developments in trade negotiations. Progress on a free trade agreement with the European Union and advancements in trade talks with the United States have bolstered investor sentiment.

Analyst Perspectives: Priced-in Positives and Caution

At current valuations, market watchers believe most of the optimistic outcomes from these trade developments are already reflected in stock prices. G Chokkalingam, founder and head of research at Equinomics Research, noted the significance of the EU and US markets for India's exports, anticipating a stabilization of the rupee and a potential return of foreign investors. He recommends accumulating small- and mid-cap stocks for the short to medium term. However, UR Bhat, co-founder & director at Alphaniti Fintech, adopts a more cautious stance. While acknowledging that the trade deals have clarified the air regarding import stances, Bhat anticipates market reactions will hinge on the finer details of the India-US trade pact once elucidated. "The markets are likely to react to the trade deal fine print," he stated, suggesting investors remain invested for now and only consider investing in large-caps during a 2-3% correction.

Sectoral Performance and Technical Outlook

Sector-wise, the Nifty Energy, Realty, and Consumer Durables indices have emerged as top performers, registering gains of approximately 7-10%. In contrast, the Nifty IT sector has lagged, experiencing a decline of nearly 7%. Technically, the Nifty is testing the 25,800 hurdle, with a close above this level potentially leading to a rally towards 26,100, according to Nandish Shah, senior derivative and technical analyst at HDFC Securities. Support is anticipated around 25,500-25,550. Ponmudi R, CEO of Enrich Money, observes that the Nifty is trading above its major moving averages, indicating a constructive setup. Sustaining above 25,700 is crucial for maintaining a positive structure, while a dip below 25,650 could trigger profit-booking or consolidation. Key support lies in the 25,500–25,600 zone, coinciding with the 50- and 100-day EMAs. The 26,000 mark represents a significant psychological resistance, with a sustained breakout potentially paving the way for fresh all-time highs. Momentum indicators, including the RSI and MACD, suggest improving upside momentum.

Disclaimer:This content is for educational and informational purposes only and does not constitute investment, financial, or trading advice, nor a recommendation to buy or sell any securities. Readers should consult a SEBI-registered advisor before making investment decisions, as markets involve risk and past performance does not guarantee future results. The publisher and authors accept no liability for any losses. Some content may be AI-generated and may contain errors; accuracy and completeness are not guaranteed. Views expressed do not reflect the publication’s editorial stance.