Street: Drivers of the Market Rally

Indian Stock Markets Recover Sharply After 10-Day Losing Streak Amid Hopes of US Tariff Relief

Indian equity markets staged a strong comeback on March 5, ending a 10-day losing streak, as benchmark indices rallied sharply on the back of positive global cues, value buying, and optimism surrounding potential tariff relief from the US.

The BSE Sensex surged 943.87 points (1.29%) to close at 73,933.80, while the Nifty 50 jumped 312.25 points (1.41%) to settle at 22,394.90. Blue-chip stocks, including Tata Steel, Mahindra & Mahindra, HCL Technologies, Tech Mahindra, Adani Ports, Tata Motors, Power Grid, NTPC, Infosys, TCS, and Bharti Airtel, were among the top gainers.

The rebound was fueled by a combination of factors, including expectations of US tariff reductions, strong Asian market performance, and aggressive buying in beaten-down stocks.

Factors Driving the Market Rally

1. Optimism Over US Tariff Relief

A major catalyst for the rally was an indication from US Commerce Secretary Howard Lutnick that the Trump administration may reconsider its aggressive tariff policies.

• Lutnick hinted that the US might reduce tariffs on Mexican and Canadian goods, providing relief under the North American Free Trade Agreement (NAFTA).
• The US government is expected to announce a structured rollback of some tariffs as early as Wednesday, signaling a more flexible approach to trade negotiations.
• The news triggered a relief rally in global markets, including India, where exporters and trade-dependent sectors benefited from the renewed optimism.

2. Strong Performance in Asian Markets

Global cues played a crucial role in lifting investor sentiment.

• Hong Kong’s Hang Seng Index surged nearly 2% after China pledged fresh stimulus measures to counter the impact of trade tensions with the US.
• Japan’s Nikkei also moved higher, as investor confidence strengthened across the region.
• The positive momentum in Asian equities provided a strong base for Indian markets, allowing them to recover from recent losses.

3. Value Buying in Oversold Stocks

Following the steep sell-off in previous sessions, many stocks had entered oversold territory, prompting institutional and retail investors to step in and accumulate quality stocks at attractive prices.

• The Nifty Midcap 100 and Smallcap 100 indices surged nearly 2%, reflecting renewed interest in broader market stocks.
• Analysts observed that several stocks had breached critical support levels in the recent correction, presenting an opportunity for bargain hunters.
• “Many fundamentally strong stocks were trading at attractive valuations,” said Rajesh Bhosale, an analyst at Angel One. “This correction created buying opportunities, leading to today’s sharp rebound.”

4. Blue-Chip Stocks Lead the Rally

Large-cap stocks saw aggressive buying interest, with some of the top gainers rallying up to 4%.

• Tata Steel, Adani Ports, TCS, Infosys, and Bharti Airtel witnessed strong demand.
• Market experts believe that blue-chip stocks had become relatively cheap, making them attractive for long-term investors.
• “Despite global market weakness following Trump’s tariff announcements, Indian markets displayed resilience, with selective buying in key sectors,” said Vishal Vakil, a leading market strategist.

5. US Tariffs on China, Mexico, and Canada Could Boost Indian Exports

India is expected to gain an export advantage as the US imposes additional tariffs on China, Mexico, and Canada.

• Experts believe that higher tariffs on key US trading partners could shift demand toward Indian exporters in sectors such as agriculture, engineering, machine tools, garments, textiles, chemicals, and leather.
• India was among the top beneficiaries when the US imposed tariffs on Chinese goods during Trump’s first presidency.
• S.C. Ralhan, President-designate of the Federation of Indian Export Organisations (FIEO), noted, “Indian exporters could see increased shipments to the US, as buyers look for alternative markets outside China.”

Technical Outlook: Will the Rally Sustain?

Market Analysts Caution About Key Support and Resistance Levels

While the rebound is encouraging, analysts remain cautious about sustainability, given ongoing global uncertainties.

• Shrikant Chouhan, Head of Equity Research at Kotak Securities, noted that the Nifty and Sensex are trading near key support zones of 22,000/72,800 and 21,800/72,300.
• A sharp recovery after testing these support levels could signal a strong reversal, pushing the indices toward 22,800/74,300.
• However, a close below 21,800/72,300 could extend the downside toward 21,500/71,500, leading to renewed selling pressure.
• Chouhan advises a selective stock-picking strategy, recommending that investors buy on dips while maintaining a medium-term outlook.

Near-Term Resistance Levels

• Immediate resistance levels stand at 22,200/73,400 and 22,500/74,300.
• A break above these levels could lead to fresh buying interest, pushing the markets to new highs.

Outlook for Investors: What to Expect in the Coming Days

While today’s rally has brought much-needed relief to investors, market sentiment will remain sensitive to global developments, including US trade policy decisions and Asian market trends.

• Foreign Institutional Investors (FIIs) and Domestic Institutional Investors (DIIs) will play a key role in determining market direction.
• Macroeconomic data releases, global inflation trends, and crude oil prices will also influence market movements.
• The Reserve Bank of India’s (RBI) monetary policy stance and corporate earnings performance in Q4 FY25 will be closely watched by investors.

A Short-Term Bounce or a Sustainable Rally?

The sharp recovery in Indian equities has provided a much-needed breather after a prolonged losing streak. However, market volatility is expected to persist in the near term, driven by global economic uncertainties.

• Investors should remain cautious, closely monitor global developments, and adopt a disciplined trading approach.
• While short-term traders may benefit from the current uptrend, long-term investors should focus on fundamentally strong stocks with growth potential.
• If global sentiment remains favorable and institutional buying sustains, the Indian stock market could witness further upside in the coming weeks.

As Dalal Street welcomes the return of bulls, all eyes remain on global trade negotiations, US tariff announcements, and economic data releases that could shape the next phase of the market’s trajectory.