With the Union Budget due next Sunday, markets are entering a phase of heightened anticipation. Attention is also on the US Federal Reserve’s policy decision due tonight (Indian time), though markets are not expecting any major surprise.
While broader risk appetite remains intact, the sharp fall in the dollar index is emerging as a key concern. A weaker dollar has once again pushed gold sharply higher, with prices moving above $5,200 an ounce.
The US Federal Reserve will announce its monetary policy later today. Markets are largely convinced that there will be no interest rate cut at this meeting. Expectations are that any rate reduction will come only after May, once Fed chair Jerome Powell steps down.
While the policy outcome itself is unlikely to move markets sharply, investors will closely watch the Fed’s commentary, particularly on inflation and the future policy path.
In overnight derivatives trade at GIFT City, Gift Nifty climbed to 25,498 before easing. By early morning, it slipped below 25,440, indicating that domestic markets may open with marginal gains.
India and the European Union have completed negotiations on their long-pending free trade agreement. The agreement is expected to be formally signed within the next few months.
Key elements of the deal include:
Reduction in import duties on several European goods, including luxury cars
Protection for sensitive sectors such as agriculture, dairy, steel and beef
Duty-free access in Europe for Indian exports such as marine products, textiles, rubber goods, spices and processed foods
The agreement is also expected to create greater mobility and employment opportunities for Indian professionals in EU countries. Detailed implementation aspects will be worked out through further discussions.
Markets are watching closely for any reaction from the US to the India–EU agreement, though no immediate response has emerged so far.
US futures were trading with mild gains in early hours, but volatility is expected to persist until the Fed decision is announced.
On Tuesday, Wall Street ended in mixed fashion:
Dow Jones fell 0.83 percent to 49,003.41
S&P 500 gained 0.41 percent to a record close of 6,978.60
Nasdaq advanced 0.91 percent to 23,817.74
European markets closed marginally higher, except for Germany.
Asian markets were trading in divergent directions on Wednesday morning. Japan’s Nikkei declined, Australian stocks slipped on higher-than-expected inflation, while South Korean markets moved closer to record levels. Hong Kong and Shanghai indices opened higher.
After sharp intraday swings, Indian equities ended Tuesday’s session with solid gains. Although early signals from derivatives trading were positive, the market slipped into losses multiple times before recovering to close higher.
The Sensex and Nifty moved up and down by nearly 1,000 points and 300 points respectively during the session. While frontline indices closed up around half a percent, Bank Nifty outperformed with a gain of 1.25 percent.
Auto stocks came under pressure on concerns that the India–EU trade deal could lead to higher vehicle imports. Mahindra & Mahindra fell over four percent, while Maruti Suzuki and Hyundai also declined. Consumer durables and FMCG stocks ended lower.
Sula Vineyards slipped on concerns over increased wine imports, while Apex Frozen Foods surged over ten percent on expectations of higher seafood exports to Europe.
Kitex Garments jumped 11.2 percent after the promoter group’s party aligned with the BJP-led alliance. Kalyan Jewellers, which had been under pressure for nearly a month, ended marginally higher after a volatile session.
On the BSE, market breadth remained negative, with 2,510 stocks declining against 1,803 advances. On the NSE, advances outnumbered declines.
Foreign institutional investors continued to sell, with net cash market outflows of ₹3,068.49 crore on Tuesday. Domestic institutions and funds were net buyers, purchasing shares worth ₹8,997.71 crore.
Market participants caution that despite the recent rebound, the market has not decisively entered a bullish phase. Experts expect the Nifty to remain range-bound between 24,900 and 25,600, with continued volatility in the near term.
Gold extended its rally as the dollar slid to multi-year lows. Prices climbed to $5,224.80 an ounce in early trade before easing slightly.
Analysts warn that speculative activity is high and that sharp corrections cannot be ruled out. However, bullish sentiment remains strong.
In Kerala, 22-carat gold remained unchanged at ₹1,18,760 per sovereign on Tuesday, though a sharp rise is expected today. On the MCX, 24-carat gold climbed to ₹1,59,820 per 10 grams.
Silver remained highly volatile in global markets, while platinum, palladium and rhodium traded firm.
The dollar index fell to its lowest level in four years before recovering slightly. Comments from US President Donald Trump that the dollar remained strong failed to reassure markets, leading to renewed weakness.
The index has fallen over 11 percent within a year of Trump’s return to the presidency. Major currencies such as the euro, pound, yen and Swiss franc strengthened against the dollar.
The Indian rupee benefited from the dollar’s weakness, gaining 22 paise to close at 91.72 against the dollar. The India–EU trade deal had limited impact on the currency.
Crude oil prices rose more than three percent after snowstorms and severe weather disrupted production in the US. Brent crude closed at $67.70 a barrel, while WTI traded near $62.41. Natural gas prices also moved higher.
Cryptocurrencies continued to move within a narrow range, but gained modestly on Tuesday as the weakness in the dollar provided support.
Bitcoin was trading close to $89,300 in early hours.
Ether remained below $3,030.
Solana stayed under the $128 level.
Despite the uptick, market participants note that cryptocurrencies remain range-bound, with traders waiting for clearer global cues, especially from the US Federal Reserve.
(as on January 27, Tuesday)
Sensex: 81,857.48 (+0.39 percent)
Nifty 50: 25,175.40 (+0.51 percent)
Bank Nifty: 59,205.45 (+1.25 percent)
Mid cap 100: 57,483.65 (+0.59 percent)
Small cap 100: 16,419.35 (+0.41 percent)
Dow Jones: 49,003.40 (-0.83 percent)
S&P 500: 6,978.60 (+0.41 percent)
Nasdaq: 23,817.10 (+0.91 percent)
Dollar: ₹91.72 (-0.22)
Gold (ounce): $5,181.60 (+$196.50)
Gold (sovereign): ₹1,18,760 (no change)
Brent crude oil: $67.70 (+2.11 percent)