Synopsis:
NIFTY 50 is really close to touching its all-time high, surrounded by many factors such as positive developments on the India-US Trade deal, geopolitical events, expectations of further rate cuts, etc
NIFTY 50 touched an all-time high of 26,277 points on 27 September 2024. And now, NIFTY is currently trading at 25,598 points, which is just 679 points or 2.6 percent away from hitting its all-time high. In this article, we will dive into the details of what factors could make a rally in the market.
Factors to watch out for
India-US Trade Deal: According to reports, a pact between the US and India might be made public very soon, which may result in reduced American tariffs on Indian products from the existing 50 percent to roughly 15-16 percent, maybe as early as the next ASEAN summit.
Indian firms, which have high export exposure to the US market, would be the ultimate beneficiaries of this initiative. Just one of the reasons for those high US tariffs was India’s high imports of Russian oil, out of which nearly 34 percent of its crude is from Russia, and only 10% is from the US. India intends to lessen its reliance on Russian crude bit by bit, thus avoiding a sudden disruption and global price volatility.
Fed Rate Cut: The US is already facing one of its most difficult economic scenarios, with a weakening labor market and stubborn inflation. Additionally, the recent government shutdown made this scenario much worse.
Jerome Powell, while attending a conference in Philadelphia, suggested that the Federal Reserve might be inclined to cut the rates further by two more times in 2025 and once in 2026, as it is already suffering from slow employment growth. As a result, on October 29, the Fed cut its interest rate by 25 bps, which took the current rate to the range of 3.75- 4 percent.
When interest rates in the US go down, the yields on bonds become less attractive for investors. As a result, foreign institutional investors (FIIs) seek other opportunities in emerging markets such as India, where their returns could be higher.
Improving Geopolitical Scenarios: Markets have been benefiting from a de-escalation of global geopolitical conflicts. A ceasefire, negotiated by the U.S., between Israel and Hamas in the Middle East has calmed the situation and also includes the release of hostages. Russia, on the other hand, has responded to the ceasefire with a cautious welcome.
In the same way, in Eastern Europe, Ukraine has agreed to a temporary ceasefire suggested by the U.S. with Russia along the current front line, thus opening the door to wider peace negotiations. This good news is relieving investor fear and can be a source of a more stable market outlook, Indiaincluded.
Gold and Silver prices are easing: Gold and silver prices are slowly coming down from their recent peaks as the world is becoming a little less uncertain. Investors are getting back to riskier assets such as stocks, which is slightly reducing the need for metals that are considered safe havens.
The unwinding of positions is also due to the anticipated lowering of interest rates in the U.S., which would make bonds and stocks more attractive relative to precious metals. The trend can go on if the global markets keep calm.
Improving Corporate Earnings: The earnings of corporations are becoming more and more positive, which is attracting the confidence of investors to the market. For example, HUL disclosed its Q2 FY26 results and mentioned that it anticipates H2 of FY26 to be even more productive than H1, thus implying accelerated growth in the future.
Such a trend of earnings getting better across various firms can be a reason for market rallies to sustain. The logic behind this is that higher profits create the possibility for more investments, increasing stock prices and overall positive sentiment in the economy.
In summary, NIFTY 50 is almost at its highest level ever of 26,277 points, and there are many reasons why the index could go beyond that level. The market environment would be very supportive of the equity market if such factors materialize as a trade deal between India and the US, rate-cut expectations in the U.S., geopolitical tensions easing, prices of gold and silver falling, and corporate earnings improving.
It means that the NIFTY 50 index could be seen going to or even beyond its all-time high level if these scenarios were to follow through, thus business growth getting stronger, foreign investments increasing, and general market sentiment turning positive.
Written by Satyajeet Mukherjee
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