Domestic markets bounce back after US ambassador calms trade jitters

Mumbai: Domestic equity indices notched up gains on Monday in a volatile trading session, snapping a five-day losing streak, after US ambassador to India Sergio Gor's assurance that the two countries will discuss trade issues on Tuesday sparked an immediate revival. Markets had fallen over heightened concerns that the US-India trade deal was stuck in the wake of a 500% tariff threat by President Donald Trump and recent comments by commerce secretary Howard Lutnick.

The NSE Nifty rose 106.95 points or 0.4% to close at 25,790.25. The BSE Sensex climbed 301.93 points or 0.4% to end at 83,878.17. Both indices recovered by nearly 1.2% from their intraday lows as the diplomat's remarks triggered liquidation of some of the bearish bets. Gor was speaking in New Delhi after arriving in the country to take charge as ambassador, having been picked for the job.

Late last week, markets fell as Trump backed a bill allowing 500% tariffs on countries that knowingly engage in the exchange of Russian-origin uranium and petroleum products. This caused the indices to shed 2.5% last week, the biggest weekly loss since September.

Fear Gauge Up 4%
"The US ambassador's comments gave the market some relief that both sides are actively engaged in firming up a trade deal," said Narendra Solanki, head of fundamental research, Anand Rathi Share and Stock Brokers Ltd, strengthening expectations of an early conclusion to the trade talks.

Last week's tariff talk had dashed hopes of an India-US trade deal happening soon, seen as crucial for market revival.

Momentum indicators were in the oversold zone technically and that aided the quick recovery, said Rohan Shah, technical analyst at Asit C Mehta Investment Intermediates. But the markets are still precariously placed.

"If the index fails to quickly reclaim the 26,000 level, Nifty is likely to resume selling pressure, with downside potential toward the 25,200-25,000 zone," he said.

Despite market recovery, Nifty's India Volatility Index or VIX, known as the fear gauge of the market, inched up by 4% to 11.37 levels on Monday, indicating traders are unsure risks have receded.

The Nifty Midcap 150 dropped 0.2% and the Nifty Small-cap 250 fell 0.7%. Out of the total 4,485 stocks traded on the BSE, 1,468 advanced and 2,837 declined at close.

For the rest of January, the Nifty is likely to move in the range between 25,800 and 26,400, said Apurva Sheth, head of research at Samco Securities.

"Markets are likely to remain range-bound till the end of the month, taking cues from developments around US-India tariff and trade negotiations and the upcoming budget, as reflected in Monday's session," he said. "The earnings season is expected to be in line with expectations, with no major surprises."

Elsewhere in Asia, Japan gained 1.6%, China advanced 1.1%, Hong Kong rose 1.4%, South Korea gained 0.8% and Taiwan rose 0.9%.

The pan-Europe index Stoxx 600 was trading flat at the time of going to print.

Foreign portfolio investors net sold shares worth Rs 3,638 crore. Domestic institutions were buyers to the tune of Rs 5,839 crore.