Sensex Today- Indian Stock Market Rebounds: Key Drivers of Recovery

Sensex Today- How US-Russia Talks and Falling Oil Prices Impacted the Market

Sensex Today– The Indian stock market experienced a significant rebound on Thursday after six consecutive sessions of losses, mirroring a global recovery in equity markets. The BSE Sensex surged by 450 points, or 0.6 percent, to reach 76,621, while the NSE Nifty advanced by 139 points, reaching 23,185 by 10:45 AM. This recovery follows a volatile Wednesday session when both indices fell over 1 percent before paring most of their losses. Despite this late rebound, both indices had closed marginally lower for the sixth consecutive session.

Sectoral Indices Show Broad Gains

On Thursday morning, most sectoral indices showed positive movement, with the Nifty Pharma index leading the charge as the biggest gainer. The Nifty Metal index also recorded a notable rise, climbing 1.5 percent, aided by positive news surrounding Russia-Ukraine peace talks and the impact of Q3 earnings, which helped reverse the losses triggered by US President Donald Trump’s import tariffs.

Here are the key factors that contributed to the recovery of Indian markets:

1. Global Optimism from Potential Russia-Ukraine Peace Talks

Investor sentiment saw a sharp improvement following news that the US and Russia are set to engage in peace talks, raising hopes of an end to the ongoing conflict in Ukraine. US President Donald Trump and Russian President Vladimir Putin agreed to initiate dialogue, offering relief from prolonged geopolitical instability.

The potential for de-escalation resulted in a rally in global equities, with the S&P 500 futures gaining 0.2 percent, Nasdaq futures climbing 0.4 percent, and European stock futures rising 1 percent. Asian stock markets mirrored this optimism, with Japan’s Nikkei rising by 1.1 percent and Hong Kong’s Hang Seng index reaching a fresh four-month high. These developments overshadowed concerns over US inflation and rising Treasury yields, as investors focused on the potential easing of geopolitical tensions.

2. US Inflation Shock Absorbed, Fed Rate Expectations Stable

Despite a higher-than-expected US inflation report, global markets rebounded as investors had already priced in an extended pause on interest rate hikes by the US Federal Reserve. The US consumer price index (CPI) rose by 0.5 percent in January, the highest increase since August 2023, while the annual CPI climbed to 3.0 percent, surpassing the forecasted 2.9 percent. In response, Treasury yields saw an uptick, with the 10-year yield hitting 4.66 percent overnight before easing to 4.615 percent. However, market analysts believe that the US Federal Reserve is unlikely to raise rates further in the near term, which limited the downside impact on equities.

3. India’s CPI Inflation Falls, Boosting Rate Cut Expectations

India’s retail inflation dropped to 4.31 percent in January, its lowest level in five months. This figure was lower than economists’ expectations of 4.6 percent and significantly lower than December’s 5.22 percent. This sharp drop, primarily driven by falling food price inflation, has fueled expectations that the Reserve Bank of India (RBI) could cut rates as soon as April. According to Sakshi Gupta, principal economist at HDFC Bank, “Inflation is expected to print between 4-4.5 percent over the next two months. The trajectory provides greater confidence that the RBI is likely to deliver another rate cut in the April policy.” Such expectations of rate cuts further buoyed investor sentiment, as lower interest rates can support economic growth and corporate earnings.

4. Falling Oil Prices Ease Inflation Concerns

Oil prices continued to decline on Thursday, with Brent crude slipping to $74.66 per barrel and US crude dipping to $70.88 per barrel, extending losses from the previous day. The drop in oil prices came in the wake of reports that US-Russia peace talks could reduce geopolitical risks, potentially lifting sanctions and improving global supply chains. For India, a major oil importer, falling oil prices help ease inflationary pressures and reduce fiscal risks, which supports domestic equities. The falling cost of oil is seen as a positive development for India’s economy, as it reduces the cost of imports and helps keep inflation in check.

5. Positive Sentiment in Chinese Markets Boosts Asian Confidence

The recovery in Asian markets was also fueled by improved sentiment in Chinese equities. Hong Kong’s Hang Seng index climbed 1 percent to a fresh four-month high, while Chinese blue-chip stocks showed signs of stability. This growth reflects investors’ optimism about the Chinese economy, with a particular focus on technology and consumer sectors. The relative stability in Chinese stocks contributed to overall positive sentiment in the broader Asian markets.

6. Investors Focusing on Large-Cap Stocks as Valuations Stabilize

After a 3 percent drop over six sessions, investors began selectively purchasing large-cap stocks that had been significantly undervalued during the recent correction. Mutual fund inflows remained robust, helping to stabilize the market. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, remarked, “The current weakness offers an opportunity to move from mid and small caps, which are still overvalued, to fairly valued large caps.” This strategic shift in investment focus helped stabilize the market and encouraged more buying activity in large-cap stocks, which are seen as more stable investments.

A Balanced Outlook for Indian Markets

While Indian markets have recovered significantly, a balanced outlook remains essential. Investor sentiment remains cautiously optimistic, bolstered by factors such as falling inflation, easing oil prices, and the potential for peace talks between Russia and Ukraine. However, uncertainties such as US inflation trends and global geopolitical risks still loom large. Investors are advised to stay vigilant and monitor key data points, including inflation reports, oil prices, and geopolitical developments, as they will continue to play a crucial role in determining the direction of the market in the coming months.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Cryptocurrencies and stocks, particularly in micro-cap companies, are subject to significant volatility and risk. Please conduct thorough research before making any investment decisions.