Sensex, Nifty trade choppy as Fed decision nears, West Asia tensions rise

Indian equities witnessed a choppy trading session by midday, with the benchmark indices, Sensex and Nifty, swinging between gains and losses. After a negative start, the Nifty50 index staged a brief rally, nearing the 25,000 level, but failed to hold the upward momentum. As the session progressed, the index slipped back into negative territory as investors turned cautious ahead of US Fed policy decisions and rising geopolitical tensions in West Asia.

 

Last checked, the Nifty50 was trading at 24,791.3 levels, down 62.1 points or 0.25 per cent and the Sensex was down 220.23 points or 0.27 per cent at 81,363.07 levels. The majority of sectors, barring Nifty Auto and Consumer Durables, were trading lower on Wednesday. The Nifty Media index emerged as the top laggard, followed by IT, Metal, FMCG, Oil & Gas, Energy and Pharma.

 

 

The Nifty Auto index was trading higher amid reports that India is looking to hedge supply chain risks in rare earth magnets by exploring alternative sources like Australia, Argentina, Brazil, and Chile as China is limiting its exports.

 

In the broader markets, the Nifty Midcap 100 index was down 0.37 per cent and Nifty Smallcap 100 was trading flat with a negative bias. 

 

From the Sensex constituents, Nestle India, Adani Ports, Hindustan Unilever, L&T and Tata Steel were the top laggards. IndusInd Bank, Mahindra & Mahindra, Maruti Suzuki, Bharti Airtel and Eternal were the top gainers. 

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The volatility comes as missile attacks between Iran and Israel have continued for a fifth day amid reports that Israeli airstrikes damaged Iran’s underground Uranium facility at Natanz.

 

US President Donald Trump called for 'unconditional surrender' from Iran, citing the possibility of killing Supreme leader Ayatollah Ali Khamenei. 

 

VK Vijayakumar, chief investment strategist at Geojit Investments says that the latest tweet by President Trump and the US defence movements in West Asia signal aggravation of the conflict. "However, there is no panic in global equity markets and it appears that the markets' assessment is that this conflict will end soon without impacting the global economy," he said.

 

"It is important to understand that after the Covid crash which took the Nifty to a low of 7511 in March 2020, we are in a bull market which has been climbing all walls of worries. The market is likely to climb this Israel-Iran conflict worry, too. Despite the high valuations, particularly in the broader market, the market is likely to remain resilient supported by sustained strong liquidity and hopes of turn around in earnings," Vijayakumar said.

 

From the technical perspective, the 24,500-25,000 range will hold in the near term and is likely to be broken on the upside when positive news relating to the West Asian conflict comes. 

 

In addition, the focus will be on Federal Reserve Chair Jerome Powell as the FOMC is scheduled to announce its policy decision tonight. Investors will closely watch for Powell's commentary on potential rate cuts in the future and the threat from the rising oil prices to the US economy.