The week began on a positive note, extending the festive-driven optimism seen over the past month. However, volatility increased as the week progressed, with momentum easing amid geopolitical tensions and profit-taking.
Over the month, Nifty 50 rallied by 1,500 points to the 52-week high of 26,104, up +6%. Profit booking was triggered as the benefits expected from the key events, such as US-China, US-India and Fed policy, got diluted, taking it below the crucial threshold of 25,900, and closing Friday closing at 25,722.
Meanwhile, the precious metal (gold) witnessed extreme volatility too during the fortnight, suffering its sharpest fall in the decade, driven by profit booking triggered by the strengthening of the USD. The inverse relationship between the two reflected easing global trade risk expectations.
Generally, it is considered positive for the equity market as a reflection of a reduction in geopolitical risk and possible shift in fund flows from haven to equity assets, which had garnered a huge speculative investment in the last year leading gold up by 60%.
Stock market outlook
The Indian market is on a profit-booking mode due to the good performance of the stock market in the last month and the surge in crude prices following the sanctions of the US and EU on Russian oil imports. However, the impact is expected to be contained by higher OPEC+ supply, with greater clarity likely after November 21, when the sanctions take effect.
A prolonged increase in crude prices could pressure India’s fiscal position, which benefited in the past 1–2 years from stable, moderate oil prices that kept import bills in check.
As expected, the U.S. Fed cut interest rates by 25 bps. However, the market is consolidating after Powell indicated that possibility of further rate cuts for 2025 has tempered. The ensuing strength in the U.S. dollar has fuelled a risk-off sentiment across emerging markets, including India.
At the same time the global market was watchful about the US-China trade development. The Trump–Xi meeting was seen as a positive step, though progress remains gradual, with the US reducing tariffs on Chinese imports by only 10%, from 57% to 47%, leaving significant restrictions in place.
Should you buy in the dip?
Similarly, the narrative about India-US trade negotiations is also constructive; however, the market will have to wait for maybe another 1 to 2 months to understand whether the US tariff on India could be reduced from the current 50% to 15-16%. As the prevailing uncertainty stay around the plot, the market sentiment became hostile in the short-term. We expect the buy-in-dip strategy to persist as the market continues to stay optimistic on future development.
Despite the volatility of the main indices, the undercurrent of the broad market remained encouraging. The metals sector gained on renewed optimism following China’s announcement to curb steel overcapacity and potential progress over US-China trade relations, while PSU banks outperformed amid reports of a potential increase in FII holding limits, industry consolidation and fairly good Q2 results.
The author, Vinod Nair, is Head of Research at Geojit Financial Services.
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.