Indices rally on optimism around India Inc earnings, US-China talks

Brokerages remain cautious on broader market outlook amid macroeconomic pressures

Domestic markets rallied on Thursday, tracking gains in global equities amid signs of progress in US-China trade talks, although concerns over persistent foreign outflows, elevated crude oil prices and a weakening rupee continued to weigh on investor sentiment. 

The Sensex rose 790 points, or 1.1 per cent, to close at 75,399, while the Nifty 50 advanced 277 points, or 1.18 per cent, to settle at 23,689.60. The benchmark indices were down nearly 4 per cent over the previous four sessions. 

Global sentiment improved after Chinese President Xi Jinping said trade discussions with America were making progress during a summit with US President Donald Trump. According to a White House readout, both leaders also agreed that the Strait of Hormuz must remain open to ensure uninterrupted energy flows. 

 

Broader markets also participated in the recovery, with the Nifty Midcap 100 index rising 1.1 per cent, while the Nifty Smallcap 100 ended largely flat. Fifteen of the 16 major sectoral indices closed in green. 

Banking stocks led gains, with index heavyweight HDFC Bank climbing 2.7 per cent and snapping a five-session losing streak. Bharti Airtel gained 5.3 per cent after reporting a rise in quarterly profit, while state-run explorer Oil India added 2.1 per cent on stronger earnings. 

Despite Thursday’s rebound, brokerages remained cautious on the broader market outlook amid macroeconomic pressures. In a note, Ambit Capital said the government could undertake further measures to curb imports and preserve foreign exchange reserves after raising customs duty on gold. 

“In our view, the recent hike in gold customs duty from 6 per cent to 15 per cent marks the first step in import discipline and conserving FX reserves, which could be followed by additional measures like calibrated fuel price hikes, tighter LRS (Liberalised Remittance Scheme) outflows and introducing instruments to mobilise offshore dollar liabilities,” the brokerage said. 

Foreign portfolio investors have sold a record ₹2.2 trillion worth of Indian equities so far this year, adding pressure on domestic markets and the rupee, which weakened to a fresh record low of 95.9 against the dollar. 

Siddhartha Khemka, head of research, wealth management, at Motilal Oswal Financial Services, said near-term risks continue to remain elevated despite the recent recovery in equities. 

“The near-term outlook remains cautious despite Indian markets witnessing a rebound in the past two sessions. Persistent foreign outflows, elevated crude oil prices (around $105 per barrel) and the Indian rupee slipping to fresh record lows continue to pose key macro risks for the domestic market,” he said. 

Information technology stocks, however, bucked the strong market trend hitting fresh three-year lows. The Nifty IT index declined 2 per cent, extending its four-session fall to nearly 7 per cent, amid concerns over the impact of generative artificial intelligence on earnings growth. 

In a note, Kotak Institutional Equities said weak deal wins, softer guidance and GenAI-led pricing pressure were likely to keep valuations of software exporters under pressure. 

“The combination of minor miss in growth estimates, unexciting total contract value, guidance below expectations and reality of GenAI-led revenue deflation will keep pressure on multiples intact,” the brokerage said, adding that the headway in artificial intelligence-driven opportunities may not be sufficient to offset growth headwinds and rising competitive intensity in the near term.