Investors are likely to look for profits after a spectacular rally the previous day.
Positive global signals provided support over night, but domestic factors such as Q4 earnings and upcoming inflation figures, along with the recent rise, suggest that we are in a consolidation period or reversal.
On Monday, Dalal Street witnessed an exceptional day.
The Nifty 50 benchmark index settled decisively over the 24,900 level, at 24,924.70. This was after an impressive gain of 916.70 or 3.82%.
BSE Sensex reflected this euphoria by jumping 2,975.43 or 3.74% to close at 82429.90.
The rally was fuelled by both domestic and foreign news that were positive, including the ceasefire agreement between India and Pakistan and the apparent US-China trade deal, which includes a 90 day tariff-free period.
This surge was a result of broad-based purchases across all sectors, including real estate, energy and telecoms, as well as infrastructure and banking.
Early signs point to a slower start
Early indications for the session on Tuesday suggest that a cautious tone will prevail.
The NSE International Exchange Gift Nifty Futures were trading between 24,914 and 24,922 (down 26-130 points depending on which early reading you use), signalling a possible gap-down, or weaker opening for the domestic markets.
After such an impressive one-day profit, traders will look to protect their profits.
Wall Street rallys and Asia mix
Wall Street’s major three indices have closed strongly higher overnight, boosted by news of the US-China Trade Deal, which includes a tariff-free period for 90 days.
The Nasdaq Composite rose 4.35% to the highest level since late February, and the Dow Jones Industrial Average gained 2.81%.
Asian markets were mixed on Tuesday. Although some markets, such as Japan’s Nikkei (+1.7%), and South Korea’s Kospi (+0.65%), were higher in the early trades, Hong Kong’s Hang Seng (-1.25%) was notable. This indicates some regional divergence, despite a positive US market lead.
The key factors that influence today’s business
Investors will pay close attention to a number of factors today.
- Data on inflation: Release of the domestic data will influence expectations about future Reserve Bank of India policies.
- Earnings for Q4: The fourth quarter earnings season is ongoing and continues to offer stock-specific signals as well as insights into the health of corporations.
- FII flows Foreign Institutional Investors returned to the market as net purchasers on Monday after a short pause, buying equities valued at Rs 1,246.48 Crore. It is important that FIIs continue to show interest in the market.
- Geopolitical Monitoring: While India and Pakistan relations have been improved by the ceasefire, investors are still vigilant about any future developments.
- Technical Levels: Following Monday’s surge in which Nifty reached an intraday peak of 23,944 and then closed even higher, the traders will watch key resistance and support levels to see if they can sustain this upward momentum or whether consolidation is needed.
Experts predict that despite the positive domestic and international trade signals, Tuesday will likely see some consolidation or profit taking.
The post Indian markets: Sensex and Nifty to pull back after record 4% rise on May 12 may change as new information is released.
