The Indian benchmark indices closed higher on Wednesday as the Sensex declined over 25 points to close at 83,713.53 and the Nifty inched up 15 points to end trade above 25,700.
Previously, during the morning session, the BSE Sensex started today’s trade just under 83,400, crashing more than 350 points, while the NSE Nifty50 began the morning a little below 25,640, taking a beating of slightly over 130 points, around 9:15 AM.
Indian equity benchmarks are likely to open on a cautious note on Wednesday, with early pre-market signals pointing to profit-booking after Tuesday’s historic rally sparked by the India–US trade deal.
Markets had surged after the US cut tariffs on Indian goods to 18 per cent from 50 per cent, lifting sentiment around exports, capital inflows and currency stability. However, the sharp gains appear to have prompted some cooling off, with investors turning selective amid elevated valuations and mixed global cues.
Post-Rally Consolidation Likely
Tuesday delivered one of the strongest single-day performances in recent months. The Sensex jumped 4,205.27 points, or 5.14 per cent, to an intra-day high of 85,871.73 before ending the session at 83,739.13, up 2,072.67 points or 2.54 per cent. The Nifty also posted sharp gains during the session.
The rally significantly boosted investor wealth, with the total market capitalisation of BSE-listed companies rising by Rs 12,10,877.45 crore to Rs 4,67,14,754.77 crore ($5.16 trillion).
Despite the strong momentum, market participants now expect consolidation as valuations remain stretched and near-term triggers appear limited.
IT Weakness, Valuations To Cap Upside
“The rally fuelled by the US-India trade deal will face hurdles to sustain. The IT selloff in the US yesterday will drag the Indian IT index, too, constraining the rally in the Indian market. Since valuations continue to be high there is no fundamental support for a sustained rally. A trigger from monetary policy scheduled on 6th Feb is unlikely since the MPC is expected to retain the rates and stance with a dovish tone. The economy is now in a state where a monetary stimulus is not required. So, it is likely that the MPC will wait to see the monetary transmission play out. The auto numbers on January suggest that the buoyant demand continues,” said VK Vijayakumar, Chief Investment Strategist, Geojit Investments.
Vijayakumar added that Tuesday’s 639-point rally was largely driven by foreign institutional investor short covering and cash market purchases worth Rs 5,236 crore. “Given the valuations, this bullish trend is likely to run out of steam. Investors should stick to fairly valued largecaps. The sectors that are expected to gain from exports to US, like textiles and apparels, gems and jewellery and marine processing will witness some more price action.”
Focus Shifts To RBI Policy
Investor attention will now turn to the Reserve Bank of India’s Monetary Policy Committee meeting, which begins today. Governor Sanjay Malhotra is scheduled to announce the policy decision on February 6, with expectations that rates and the policy stance will be maintained, albeit with a dovish tone.
Markets will assess whether the optimism generated by the tariff cut translates into sustained foreign inflows, or whether valuation concerns and global volatility drive a period of near-term consolidation.
