Opening Bell - Daily Morning Commentary

Market Mosaic - US Economy, Tech Earnings, and Shot Build-up before the Budget.

Dalal Street braces for action-packed session with multiple market-moving events in focus this week.

U.S. equity markets advanced Thursday, buoyed by robust fourth-quarter GDP data and mixed corporate earnings. The economy grew at a 2.3% annualized rate in the fourth quarter, moderating from 3.1% in the previous quarter. Notably, personal consumption expenditures reached their highest level in seven quarters, underscoring resilient household spending.

Tech giants Meta and Microsoft both surpassed analysts' earnings and revenue expectations. While Meta shares climbed, Microsoft stock declined roughly 6% after issuing softer-than-expected revenue guidance for the current quarter. Positive commentary from Tesla helped counterbalance Microsoft's cautious outlook.

Former President Trump is expected to announce by day's end whether to impose a 25% tariff on Mexican and Canadian oil imports, potentially taking effect February 1. Market participants remain cautious, as uncertainty surrounding these tariff and fiscal policies makes it challenging to establish sustainable investment strategies.

In Asian markets, the yen is poised to deliver its strongest January performance since 2018, bolstered by expectations that the Bank of Japan (BOJ) will continue its rate-hiking trajectory while other major central banks pivot toward monetary easing. We have featured these trends in detail in our "Chart of the Day" section in our Daily Report – do have a look.

Public sector stocks dominated trading yesterday, with the Nifty PSE index surging nearly 2% as investors positioned themselves ahead of the Union Budget. Markets anticipate increased allocations to public sector undertakings as the government seeks to propel economic growth.

In derivatives trading, foreign institutional investors hold substantial short positions, with nearly 89% of their Index Futures positions on the bearish side. After four consecutive declining series in the Nifty, historical patterns suggest a potential rebound in February, driven by short covering from foreign investors. Two crucial events – the Union Budget and the Reserve Bank of India's interest rate decision on February 7 – will likely determine the market's direction.

The Nifty has gained over 500 points in the past three sessions from its recent swing low of 22,786, buoyed by short covering and optimism surrounding growth-oriented policies expected in the Union Budget. The index now faces immediate resistance at the previous swing high of 23,426, while finding support in the 23,050-23,100 range.

Indian markets are likely to open mildly higher in line with positive global cues.