The equity benchmark indices rebounded post noon on Tuesday, recovering from early losses as investors turned optimistic on expectations of a US Federal Reserve rate cut and progress in US–China trade talks.
The Sensex, which fell 551.18 points or 0.65 percent to an intraday low of 84,227.66, pared losses and settled at 84,628.16, down 150.69 points or 0.18 percent.
The Nifty also recovered after slipping to 25,826.15, down 140 points or 0.53 percent. It moved back above the 25,900 mark to settle at 25,936.20, down 29.85 points or 0.11 percent.
Tata Steel, JSW Steel and SBI Life Insurance Company were the top gainers in the Nifty50 pack, while the Tech Mahindra and Bajaj Finserv were major laggards.
Key drivers of market recovery
1) Fed rate cut expectations: Investors are tracking the outcome of the US Federal Reserve’s policy meeting, where policymakers are widely expected to reduce short-term interest rates by 25 basis points. Lower US rates typically improve global liquidity and make emerging markets like India more attractive for investment.
2) US–China trade optimism: Comments from officials in Washington and Beijing indicating a "preliminary consensus" ahead of a meeting between US President Donald Trump and Chinese President Xi Jinping helped improve sentiment. Both sides expressed confidence in progress toward a trade agreement.
"Market sentiment remains upbeat, supported by five catalysts: A softer US CPI boosting rate cut hopes, prospects of a US–China trade deal, FII inflows in recent sessions, record-high Wall Street indices, and a strong start to Q2 earnings," said Prashanth Tapse, Senior VP (Research), Mehta Ltd.
3) Monthly expiry volatility: The Nifty monthly derivatives expiry on Tuesday contributed to intraday volatility as traders rolled over positions to the next series.
4) Volatility index ease-off: The India VIX declined 2 percent to 12.12 after an earlier rise of 5.5 percent, indicating reduced investor nervousness and supporting equity confidence.
5) Positive Global cues: Asian markets were mixed, with Shanghai’s SSE Composite and Hong Kong’s Hang Seng trading higher, while South Korea’s Kospi and Japan’s Nikkei 225 declined. US markets closed in positive territory on Monday.
On the technical front, Anand James, Chief Market Strategist at Geojit Financial Services, said Nifty’s upmove on Monday was unable to clear the 25,940–26,000 range. He said a breakout above 26,000 could help extend the uptrend, while a fall below 25,900 may weaken momentum. A deeper slide towards the 25,590–25,400 range appears less likely for now, he added.
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