Markets eye brighter side: Sensex, Nifty recover from early losses amid IT rout

Synopsis

In a surprising turn of events, Indian stock markets rebounded on Friday after starting the day in the red. Traders reacted to optimistic developments surrounding a US-India trade agreement, even as apprehensions loomed over the global tech industry. Both the Nifty and Sensex climbed slightly, though the IT sector faced downturns.

India's equity benchmarks clawed back from early losses to eke out gains at close on Friday, as investors balanced the optimism ahead of the release of the US-India trade deal details against the nervousness in the global technology pack.The NSE Nifty added 0.2% to finish at 25,693.7, while the BSE Sensex rose 0.3% to 83,580.40. Both gauges ended the event-fuelled six-session trading week with gains of roughly 1.5% for the second week in a row.

The Nifty IT index declined 1.5% on Friday, posting 5% losses for the week, as the slide in the US technology and AI stocks on concerns around rising AI-related spending at Alphabet and intensifying competitive pressures spilt over to the software services stocks in the rest of the world. Elsewhere in Asia, South Korea dropped 1.4% and Hong Kong slipped 1.2%. China was down 0.3%, Taiwan was flat, while Japan bucked the trend with an 0.8% rise. "IT stocks are having a rough time given the slump in tech stocks globally due to increasing focus on AI, and investors should stay cautious on the sector," said UR Bhat, co-founder and director, Alphaniti. Bhat added that Friday's pullback was likely supported by foreign buying.

Foreign portfolio investors were net buyers on Friday at ₹1,951 crore, while domestic institutions sold ₹1,265 crore. In February so far, global investors have purchased equities worth ₹9,716 crore after selling to the tune of over ₹34,000 crore in January.

Investors had to navigate sharp swings in the market through the week, starting with the Union budget in the special trading session on Sunday, the Indo-US trade deal finalisation on Monday, the risk-off sentiment in the technology sector and the RBI's Monetary Policy on Friday when the central bank held the repo rate steady at 5.25%on expected lines. Analysts said investor mood now hinges on the fine print of the bilateral trade pact.

"The market is waiting for the fine print of the US-India trade deal as currently it seems like there is a possible risk of a large influx of American imports," said Bhat. "If the deal favours Indian exports on balance, then there is scope for meaningful gains."

Derivatives indicators pointed to growing uncertainty. A widening trading range suggested a lack of conviction among traders.

"The headline indices opened on a strong note after the US-India trade deal and rallied close to the lifetime high levels however, since then, it has been drifting lower, indicating caution," said Ajit Mishra, SVP Research, Religare Broking. He added that "the levels around 25,400 are make or break for the market as any move lower could lead to a slide and result in gap closure around 25100."

In commodities, gold rose 2.3% and silver jumped 4.7% to $74 on Friday morning, recovering from the early day losses. Mishra noted that while gold remained relatively stable, silver could face further pressure. Geopolitics could also play a role in the market direction.

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