Opening Bell - Daily Morning Commentary

Trump's Tariff Move Rattles Global Markets

US Stocks tumbled on Friday afternoon after the White House’s confirmation of tariffs against Canada, Mexico and China would take effect on Saturday. It caught markets off guard as most had been hoping that Trump wouldn't follow through on his earlier threat to impose tariffs on Feb. 1

U.S. Commerce Department data showed that the Personal Consumption Expenditures (PCE) Price Index rose 0.3% last month, the largest increase since last April, amid a surge in consumer spending, suggesting the Federal Reserve would probably be in no hurry to resume cutting interest rates.

The January nonfarm payrolls report due next week will signal whether the labor market remains buoyant despite high borrowing costs.

Investors have been bracing for further tariff news after Trump has repeatedly warned about using the measure. Uncertainty over the impact of tariffs has muddled the outlook for the economy and inflation.

European markets traded higher overnight following lower-t*an-expected inflation readings in Germany and France.

Pre-Budget optimism fuels markets

Ahead of the Parliament’s Budget session, Prime Minister Narendra Modi invoked goddess Lakshmi during his customary address with a specific mention of the middle class and poor. It fuelled widespread anticipation across India's middle class and corporate sectors as Finance Minister Nirmala Sitharaman prepares to present her eighth consecutive Union Budget. Expectations are high that she will announce changes to income tax slabs, introduce incentives for the new tax regime, and provide home loan exemptions.

Indian markets rallied for the fourth consecutive session on January 31, with the benchmark indexes gaining over a percent amid pre-Budget optimism. If the union budget falls short on measures aimed at stimulating investment and economic growth, markets will not take that kindly.

Market showed significant strength as the Nifty breached key resistance levels, surpassing both its 20-day exponential moving average and the previous swing high of 23,327 and 23,426 respectively. Heading into today’s special budget session, the index faces crucial resistance at the 50-day and 200-day exponential moving averages of 23,681 and 23,622.

A decisive break above 23,681 could propel the Nifty toward 24,000, while 23,426 and 23,327 should provide support in the near term.

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.

Opening Bell - Morning Commentary

Brace for volatility

The Federal Open Market Committee (FOMC) maintained its target range for the federal funds rate at 4.25%-4.5%. The Fed also made no change to its balance-sheet-reduction program, known as quantitative tightening (QT). Fed Chair Powell took a measured stance in his post-meeting press conference, acknowledging progress in inflation cooling while reiterating that the central bank remains data-dependent. Jerome Powell's comments did little to alter investor expectations for rate cuts later in the year.

Recent earnings announcements from three of the market-leading Magnificent 7 stocks received a lukewarm response from investors. Microsoft shares declined more than 3% in after-hours trading, while Tesla experienced initial losses before recovering. Meta saw a modest decline of one percent.

Apple is set to release its earnings report later today, that is keeping tech investors on the edge of their seats.

Asian markets are trading mostly higher, with some markets still closed for the Lunar New Year holiday.

Back home, Nifty rose for the second consecutive day with a gain of 205 points or 0.90%, to close at 23163 on 29th January. After three days of consecutive fall, the smaller stocks registered a sharp pullback of 3.32%, the highest one-day rise in percentage terms since 5th June 2024.

Our market is expected to experience significant volatility today. Following recent regulatory changes to expiration dates, derivative contracts for all five indices will expire simultaneously today. Substantial outstanding short positions in all these indexes is likely to create turbulent trading conditions. Adding to the market dynamics, 21 stocks available for derivative trading will release their quarterly results today, further amplifying potential price swings.

Nifty has closed above its 10 DMA for the first time since 3rd Jan 2025. FPIS and local traders are covering their shorts before the union budget on Saturday. Support has shifted up at 23000, while immediate resistances for the Nifty are seen at 23347 and 23426.

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