Sensex up 313 pts, Nifty above 25,330: Optimism over US trade talks among key factors behind market rise

Key factors behind market rise

Indian benchmark indices Sensex and Nifty extended gains on September 17 on the back of multiple positive factors. Sensex gained around 313 points (nearly 0.4 percent) to close at 82,693.71. Nifty 50, meanwhile, rose 91 points (0.36 percent) to end the session at 25,330.25.

PSU Bank stocks led gains, with IT, realty, auto and media stocks were also among the top gainers. FMCG, metal and pharma stocks, however, were trading in the red.

Here are the possible key factors pushing the markets into the green:

Cooling India-US trade tensions:

Indo-US relations have seen some improvement in recent days with US President Donald Trump and Prime Minister Narendra Modi agreeing to resume trade talks. Brendan Lynch, a key US trade negotiator arrived in India yesterday to discuss 'trade issues' between Washington and New Delhi. Trump called Prime Minister Modi a "dear friend" and talked optimistically about the trade momentum. PM Modi, in turn, reaffirmed India and US as "close friends and natural partners" and expressed confidence that current trade talks would unlock significant potential for both nations.

In a post on Truth Social, Trump said he had a "wonderful call" with PM Modi. "I wished him a very Happy Birthday! He is doing a tremendous job. Narendra: Thank you for your support on ending the War between Russia and Ukraine! President DJT," he wrote. The Indian Prime Minister then thanked him for his birthday wishes.

The cooling trade tensions between India and US provided much needed boost to the stock markets, as investors earlier remained worried over the impact of Trump's 50 percent tariff on India.

Motilal Oswal Financial Services said the markets are likely to be supported by encouraging developments in the ongoing US-India trade negotiations. "A recent phone conversation between the US President and Indian Prime Minister on Modi’s birthday signals a willingness to ease tensions between the two major economies, further boosting investor sentiment," the domestic brokerage said.

Likelihood of Fed rate cut:

The US Federal Reserve is holding its FOMC meeting from September 16 to September 17. The American central bank's chief Jerome Powell is set to announce the outcome of the meet later today. Analysts estimate that the Fed will cut rates this time — especially amid weak jobs data and rising pressure from President Donald Trump's administration.

Rate cut decision by the US Federal Reserve impact the Indian stock market, as it weighs or boosts several rate sensitive stocks. For example, a rate cut in the US is expected to increase the discretionary spending limit, which in turn benefits IT companies which derive a significant portion of their revenue from the North American market.

Also, investors expect a rate cut in the US to pave the way for a rate cut in India. The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) is set to meet between September 29 and October 1. Any rate cut announcement by the RBI directly impacts the market.

Weak US dollar:

Rupee recorded its best start in three weeks, opening below the 88-mark on September 17. The currency opened at 87.82 against the dollar after closing the previous session at 88.05. This comes as dollar index remained week as investors awaited Fed’s FOMC meet outcome.

"Expectations of a 25 basis point rate cut by the US Federal Reserve in today's FOMC meeting, coupled with the US Dollar Index dropping to a 3.5-year low below the 96 mark, are likely to support market optimism," said Motilal Oswal Financial Services.

"The ongoing rally in the market is being driven by a combination of positive sentiments and fundamentals. The market expects the renewed India-U S trade talks to result in an agreement, culminating in the withdrawal of the 25% penal tariffs imposed on India. If expectations translate into reality, that would be a huge sentiment positive," said VK Vijayakumar, Chief Investment Strategist, Geojit Investments.

"Fundamentally, the GST reform is expected to trigger an impressive demand spurt led by automobiles. Auto stocks have already rallied, discounting the expectations. White goods, particularly air conditioners, can be beneficiaries. NBFCs financing the purchase of white goods, too, have rallied. Some leading private sector banks like HDFC Bank and ICICI Bank are yet to participate in the rally. These stocks are fairly valued. The Fed is expected to cut rates by 25 bps tonight. More than the rate action the Fed commentary on the evolving economic outlook and the trajectory of future rate action will be closely watched by the market," he added.

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