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Sensex and Nifty Rebound: Easing Inflation and Global Sentiment Boost
Last Updated: 14th January 2025 - 05:14 pm
Indian equity markets recovered on Tuesday, January 14, from a seven-month low recorded the previous day, driven by improved global risk sentiment and domestic factors providing stability. Key contributors to the positive outlook included reports of phased US tariff hikes, easing inflation concerns, and a stronger rupee. Gains in Adani group stocks and large-cap stabilization further supported the rebound.
At midday, the BSE Sensex rose by 308 points (0.4%) to 76,638, while the NSE Nifty increased by 108 points (0.5%) to 23,194, after reaching intra-day highs of 0.7% gains.
Key Market Drivers
Global Sentiment Boost: Global markets saw relief as reports suggested the US may phase in tariff increases gradually rather than impose a single large hike, mitigating inflation fears.
- Asian markets, including China, Hong Kong, Sydney, and Taiwan, posted gains.
- US equity futures advanced, with S&P 500 futures climbing an additional 0.3% after a 0.2% rise in Monday’s session.
- The dollar index softened to 109.54 from 109.95, easing pressure on emerging markets.
US Treasury yields remained steady, with the 10-year yield at 4.77%. Investors are closely monitoring the US December Producer Price Index (PPI) data due later today for further indications of Federal Reserve policy direction.
Rupee and Oil Price Movements: The Indian rupee showed signs of recovery, opening at 86.52 per dollar after hitting a historic low of 86.69 the previous day. The weaker dollar provided respite to import-heavy sectors.
Oil prices dipped slightly, with Brent crude futures down by 22 cents (0.27%) to $80.79 a barrel. Indian and Chinese buyers continued to explore alternative suppliers after fresh US sanctions on Russian crude disrupted global supplies.
Inflation Relief: India's retail inflation dropped to a four-month low of 5.22% in December, below the anticipated 5.3%. This decline was attributed to moderating food prices and a temporary dip in crude oil costs. Analysts believe this trend could support demand recovery and provide room for more accommodative monetary policies.
Oversold Markets Attract Investors: Oversold conditions in large-cap stocks spurred renewed buying interest.
“The steep drop in benchmark indices on Monday prompted buyers to regroup, although this may merely represent a technical rebound rather than a sustainable trend,” noted Anand James, Chief Market Strategist at Geojit Financial Services.
Surendra Goyal, Head of India Research at Citi, highlighted that large-cap valuations have returned to five-year averages, presenting more favorable investment opportunities compared to mid-cap and small-cap stocks.
Adani Group Stocks Lead the Recovery: Adani group stocks surged, with Adani Enterprises and Adani Ports posting gains of 7.9% and 5.8%, respectively, making them top contributors to the Nifty's rise. Other Adani stocks, including Adani Power and Adani Energy Solutions, saw significant jumps of 17% and over 12%, reflecting strong investor confidence.
Market Outlook: Volatility Ahead
Despite Tuesday’s recovery, analysts remain cautious about market stability.
Aishvarya Dadheech, CIO of Fident Asset Management, noted, "Mid- and small-cap segments may continue to face pressure, while Nifty and large caps could experience near-term stability."
Key upcoming events, such as US PPI data, corporate earnings reports, and the Union Budget, will likely influence market sentiment in the short term.
The Nifty is facing resistance at 23,260, with support levels at 22,900–22,800. Analysts suggest a “sell-on-rise” strategy, reflecting continued weakness in broader market trends.
Investors are advised to stay cautious, focus on large-cap stocks, and adopt risk management strategies amid lingering volatility.
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