Equity benchmarks Sensex and Nifty climbed nearly 1 per cent in Thursday’s trade, tracking a recovery in global sentiment after the US President Donald Trump said his country would not use force to acquire Greenland. It was a classic case of what analysts said ‘TACO’ (Trump always chickens out). Wall Street indices Dow Jones and S&P 500 settled 1 per cent higher overnight, Asian markets across Japan and Korea surged up to 2 per cent and fear gauge India VIX eased. The rally at home was supported by short coverings, analysts said.
On technical charts, Nifty had managed to respect its 200-DMA in the previous session, resulting in the bounceback today. Benchmark indices already looked oversold after falling for 10 out of past 12 trading sessions.
“Greenland trades were largely unwound overnight as Trump walked back on threats to impose tariffs on selected European countries over the issue. With military action also off the table, market participants then focused on the “framework” of a deal that is to come,” said DBS Bank’s Eugene Leow.
In short, this is an accelerated timeline that zooms straight into more constructive negotiations. US Treasuries and equities and rebounded alongside sentiment, he noted.
“The easing of trade and geopolitical concerns has lifted global risk appetite, triggering a rebound in risk assets and some profit-taking in safe-haven gold and silver. The improved global tone may help stabilise domestic markets after two sessions of sharp selling, though investors are likely to remain cautious,” said Ponmudi R, CEO of Enrich Money.
At 10 am, the BSE Sensex stood at 82,664.08, up 754.45 points or 0.92 per cent. Nifty was trading at 25,367.15, up 209.65 points or 0.83 per cent.
TACO: Trump always chickens out
VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited said it was yet another classic TACO ( Trump always Chickens Out) trade, the US President Donald Trump withdrew from his threat to “annex Greenland by force, if necessary” comments.
Instead, he noted Trump in Davos said: “We have reached a framework of a future deal on Greenland.” More importantly, the message that the US would “refrain from imposing tariffs on Europe” takes away the threat of a US-Europe trade war, which was dragging the markets down, the analyst said.
Ovesold market: Technical cues
“The rebound appears largely driven by oversold conditions across stocks and indices rather than by genuine buying interest. The absence of strong follow-through buying continues to cloud the prospects of a sustainable recovery,” said Dhupesh Dhameja, Derivatives Research Analyst at SAMCO Securities.
“Unless the index decisively sustains above the 25,500 swing high, which also coincides with the 10-day EMA, selling pressure is likely to re-emerge at higher levels,” Dhameja warned.Short coverings
Should coverings
Vijayakumar noted that the relief rally in the market was significant since there are about 2 lakh short contracts in the market and the market construct is right for that of short coverings.
He said the Q3 profitability of companies have been affected by higher provision for the new labour code commitments. But the market will shrug it off since this is a one time commitment.
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