Market expected to react cautiously with modest gains as risks persist

The success of the Bharatiya Janata Party (BJP) in Maharashtra and strong buying activity from foreign investors gave a significant boost to the Indian market yesterday, with the indices rising by 1.5%. Over the past two days, the market has surged by around 4%, raising hopes among many investors that a pullback rally might be underway. However, while the optimism has grown, market participants are maintaining a cautious stance. A key concern is the ongoing troubles of the Adani Group, which many believe are far from over. The decision by French company Total to freeze new investments in the group is one such example. In light of these developments, it is advised that investors proceed with caution during these volatile times.

In the derivatives market, the GIFT Nifty closed at 24,347 on Monday but fell slightly to 24,300 this morning, suggesting that the Indian market might start the day with a modest gain. Globally, the US market saw positive movement on Monday, with major indices reaching new record highs. The optimism was partly attributed to the appointment of Scott Besant, a hedge fund founder, as Treasury Secretary. Besant's appointment was seen as a positive step because of his perceived ability to implement some of Trump's policies—such as tariff hikes—without destabilising the market. As a result, US Treasury yields dropped, and bond prices rose. If there is no significant uptick in the Personal Consumption Expenditure (PCE) index due out tomorrow, bond prices are expected to continue rising.

The Dow Jones saw a notable jump of 440.06 points, or 0.99%, to close at 44,736.57. The S&P 500 climbed 18.03 points, or 0.30%, to finish at 5,987.37. The Nasdaq Composite increased by 51.19 points, or 0.27%, closing at 19,054.84. However, US futures are showing a slight dip this morning, with the Dow down 0.22 points, the S&P 500 off by 0.29 points, and the Nasdaq down by 0.32 points. US 10-year Treasury yields rose to 4.285%, which is viewed as a sign of lower interest rates.

Global markets

European markets closed higher by around half a percent on Monday. Notably, Italy's UniCredit made headlines by expressing interest in acquiring Banco BPM for $10.5 billion, but this caused UniCredit's stock to drop 4.8%. Meanwhile, Banco BPM's stock rose by 5.5%. UniCredit also signalled its intentions to pursue a later acquisition of Germany's Commerzbank, which caused Commerzbank’s shares to fall by 5%.

In Asia, markets were weaker today. Japan’s Nikkei dropped by 1.73%, South Korea’s index fell by half a percent, and Australia's market also showed a decline. However, India’s market performed well on Monday, though it lacked the momentum seen last Friday. The gains were more widespread, with both mid-cap and small-cap stocks showing solid performance. Despite this, there is still caution in the air, and observers suggest the market may continue to rise modestly for the time being.

Indian market

On the Indian stock market, the rise-fall ratio in the broader market tilted in favour of advancing stocks. On the Bombay Stock Exchange (BSE), 2,675 stocks rose, while 1,389 fell. On the National Stock Exchange (NSE), 1,955 stocks gained, and 886 stocks declined. The Nifty rose by 314.65 points (1.32%) to close at 24,221.90, while the Sensex gained 992.74 points (1.25%), finishing at 80,109.85. The Bank Nifty surged by 2.10%, or 1,072.10 points, to settle at 52,207.50. The Midcap index increased by 1.61% to close at 55,900.55, and the Smallcap index rose 2.03% to end at 18,115.85. 

All major sectors showed gains, with real estate, public sector banks, oil and gas, and financial sectors leading the charge. Other sectors, such as IT, auto, FMCG, consumer durables, pharma, and healthcare, also posted good gains. However, HDFC Bank’s shares closed lower at a record low of Rs 1,803.55. Key contributors to the Nifty’s rise included Reliance, HDFC Bank, and ICICI Bank.

Foreign investors were particularly active on Monday, net buying Rs 9,947.55 crore in the cash market, marking the highest single-day purchase since September 20, when they bought Rs 14,064 crore. Meanwhile, domestic funds and institutions sold shares worth Rs 6,907.97 crore.

In terms of market outlook, the Nifty is expected to find support around 24,155 and 24,105 today, with resistance at 24,320 and 24,370.

Meanwhile, the Adani Group continued to face challenges. After initially seeing good gains on Monday morning, several of the group’s companies saw their stocks reverse course later in the day. Notably, the French energy giant Total announced it had temporarily suspended its investments in the Adani Group, citing the need to wait for the resolution of bribery allegations. Total’s decision affects not only Adani Total Gas but also other energy ventures involving the group. This setback could complicate the Adani Group’s efforts to raise funds. Adani Green, in particular, saw significant volatility, surging over 8% in the morning, only to close down by 9.2%. Other stocks like Adani Energy, Adani Power, Adani Total, and NDTV also saw similar trends, with Adani Enterprises closing with a modest 1.67% gain after a 4.5% jump in the morning.

GQG Partners, which bought a significant amount of Adani shares last year, reassured the market by stating that it would not be selling its holdings at the moment. GQG’s shares rose by 2.5% this morning, though they have faced a 12.5% drop over the past five days.

On the positive side, shares of Federal Bank rose 1.33% to close at Rs 212.16. South Indian Bank also posted gains, rising by 1.96% to Rs 22.87. The two banks recently signed an agreement to cooperate in the gold loan sector. Cochin Shipyard saw a strong rise of 5% after securing a contract to build rigs from a US company. Kitex Garments shares gained 4.99%, closing at Rs 668.75. Public sector companies like Bharat Electronics and BHEL also saw gains.

Gold falls

Gold prices fell sharply, losing 70% of last week's gains. This was attributed to profit-taking and a shift in investor sentiment following the appointment of Scott Besant as Treasury Secretary. As investors showed greater interest in equities, gold’s appeal as a safe-haven asset diminished. Gold closed at $2,625.30 per ounce, down by $91.60, marking its largest daily drop since November 2020. The price found some support around $2,620-$2,600, but further declines are anticipated. Analysts believe gold will only rise again if the US Federal Reserve continues cutting interest rates. In India, the price of gold fell by Rs 800 to Rs 57,600 per pound. Silver also saw a decline, falling by 3.3% to $30.26 per ounce.

In the currency market, the US dollar remained steady, with the dollar index closing at 106.82, slightly down from 106.84. This helped the Indian rupee, which gained 16 paise to close at Rs 84.29. If the dollar index continues to weaken, the rupee could strengthen further.

Crude oil prices dropped again. Brent crude fell by 2.8% to $73.06 on Friday and continued its decline, reaching $72.78 this morning. WTI is priced at $68.69, and UAE Murban crude is at $71.98.

Finally, the cryptocurrency market also took a hit, with Bitcoin dropping by 4.3% to below $94,000. Other cryptocurrencies saw similar declines. After a significant rise following Trump’s victory, profit-taking has caused these assets to lose value. Some analysts predict that Bitcoin could fall further, possibly down to $78,000, though it did rise by 1.5% this morning to around $94,500. Ethereum also gained 3% to trade above $3,440.

In industrial metals, the markets showed positive movement, with copper, aluminum, and zinc all rising by over 1%.

Market indicators 

- Sensex 30: 80,109.85 (+1.25%)  
- Nifty50: 24,221.90 (+1.32%)  
- Bank Nifty: 52,207.50 (+2.10%)  
- Midcap 100: 55,900.55 (+1.61%)  
- Smallcap 100: 18,115.85 (+2.03%)  
- Dow Jones: 44,736.57 (+0.99%)  
- S&P 500: 5,987.37 (+0.30%)  
- Nasdaq: 19,054.84 (+0.27%)  
- Dollar (₹): 84.29 (-₹0.16)  
- Dollar Index: 106.82 (-0.78)  
- Gold (ounce): $2,625.30 (-$91.60

- Gold (pound): ₹57,600 -₹800
- Crude (Brent): Oil $73.06 -$02.11 .