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The Indian stock market is poised for a potentially turbulent session, as indicated by the Gift Nifty and influenced by a complex interplay of global economic factors. After a day of heavy selling pressure that saw the Nifty 50 index dip below the psychologically important 25,100 mark, market participants are bracing for continued volatility. Several key overnight developments, ranging from Asian market trends to European Central Bank (ECB) policy decisions and fluctuations in commodity prices, are expected to shape the trading landscape. The domestic equity benchmark indices, Sensex and Nifty 50, are predicted to open lower on Friday, a sentiment echoed by the trading patterns observed in the Gift Nifty. The Gift Nifty's trading activity around the 24,980 level, representing a discount of approximately 115 points from the Nifty futures' previous close, serves as a strong indicator of a negative start for the Indian stock market indices. This initial downward pressure could set the tone for the rest of the trading day, potentially triggering further selling if investors become increasingly risk-averse. The overnight performance of Asian markets presents a mixed bag of signals. While Japan's Nikkei 225 and Topix indices experienced declines of 0.41% and 0.55%, respectively, South Korea's Kospi eased by 0.1%, and the Kosdaq dropped by 0.48%. The Hong Kong Hang Seng index futures also point toward a weaker opening, contributing to the overall cautious sentiment prevailing in the Asian region. These regional market movements reflect underlying concerns about global economic growth, trade tensions, and geopolitical uncertainties. The US stock market, on the other hand, exhibited a mixed performance. The S&P 500 and the Nasdaq managed to close at record highs, fueled by positive sentiment surrounding heavyweight artificial intelligence stocks, particularly after the release of Alphabet's Q2 results. Alphabet shares experienced a gain of 0.88%, while Nvidia share price rallied 1.73%, Microsoft stock price rose 0.99%, Advanced Micro Devices shares surged 2.19%, and Amazon share price added 1.73%. This surge in technology stocks underscores the continued investor enthusiasm for companies at the forefront of the AI revolution. However, the Dow Jones Industrial Average declined by 0.70%, indicating a divergence in performance across different sectors of the US market. Furthermore, several notable companies experienced significant declines in their stock prices. Tesla stock price tumbled 8.2%, Intel shares dropped 3.66%, while IBM share price declined 8%. American Airlines stock tumbled nearly 10%. UnitedHealth shares fell 4.8% and Honeywell stock price declined 6.2%. These individual stock movements highlight the importance of sector-specific analysis and the potential for idiosyncratic risks to impact overall market performance. The European Central Bank's decision to hold its main interest rate unchanged at 2% reflects a cautious approach to monetary policy. After a year of policy easing, the ECB is taking a break to assess the implications of evolving trade relations with the United States. This decision indicates a recognition of the potential risks associated with further policy adjustments in the face of global economic uncertainty. The ECB has cut its policy rate eight times since June 2024. The formalization of the India-UK Free Trade Agreement (FTA) represents a significant milestone in bilateral trade relations. The FTA is projected to boost annual trade between the two countries by nearly $34 billion, promising easier market access for both nations. Under the agreement, 99% of Indian exports will gain tariff benefits, while British products such as whisky, cars, medical devices, and cosmetics will become more affordable in India. This trade deal is expected to provide a significant boost to economic activity and foster closer ties between India and the United Kingdom. The US jobless claims data revealed an unexpected decline in the number of Americans filing new applications for unemployment benefits. Initial claims for state unemployment benefits dropped by 4,000 to a seasonally adjusted 217,000 for the week ended July 19. This positive labor market data suggests continued strength in the US economy, potentially mitigating concerns about a recession. However, economists remain cautious about the long-term outlook, given the potential for rising interest rates and other headwinds to dampen economic growth. Gold prices experienced a slight increase, driven by a weaker dollar. However, progress in trade negotiations between the US and its trading partners helped to keep gains in check. Spot gold was up 0.1% at $3,371.86 per ounce, while US gold futures were little changed at $3,374.80. Gold's role as a safe-haven asset often leads to increased demand during periods of economic uncertainty. Crude oil prices rose amid reports of Russia planning to restrict gasoline exports to most countries. Brent crude futures gained 0.30% to $69.39 a barrel, while US West Texas Intermediate crude futures climbed 0.32% to $66.24 per barrel. These price movements reflect the sensitivity of the oil market to geopolitical events and supply disruptions.
Ajit Mishra – SVP, Research, Religare Broking Ltd. advised that “Nifty 50 index failed to cross the resistance at the 25,250 level and moved lower, reflecting a cautious sentiment among participants. Currently, select private banking majors are leading the trend, while other sectors are playing a supporting role. Given the mixed signals, we reiterate our advice to maintain a stock-specific approach and adopt a hedged strategy,” this advice to traders and investors signals that the market is currently very volatile and might not be the best time to invest. When senior analysts suggest that the market is cautious and that investors should keep their holdings with specific stocks and adopt a hedged strategy, then the investors should take heat and avoid any huge long term investments. This is because they might have to bear huge losses if the stock market crashes in the short term.
Given the multitude of factors at play, including global market cues, domestic economic developments, and geopolitical uncertainties, the Indian stock market is expected to experience continued volatility in the near term. Investors are advised to exercise caution, conduct thorough due diligence, and adopt a risk-managed approach to their investment decisions. A stock-specific approach, as suggested by analysts, may be prudent in navigating the current market environment. The market is also heavily influenced by the policies of the leading countries like the US and UK. The India-UK free trade agreement might be a game changer for both the countries in terms of business and revenue growth. Many items will be exported easily without huge tariffs so that should boost the stock market in the long run. Overall the economy and the global market have a direct influence on the Indian stock market and the coming week is going to be the same way. More and more companies are adopting AI in their strategies which has been impacting the stock market as well. The Indian stock market will be highly influenced by the global market situation in the coming days and the impact of the various new policies. Any wrong decisions will impact the market very heavily and the investors will have to bear huge losses.