The Indian stock market witnessed a strong performance on January 20, with both the Nifty 50 and Sensex indices posting notable gains ahead of the inauguration of Donald Trump as the 47th President of the United States.
The 30-share BSE Sensex jumped 454.11 points or 0.59 per cent to settle at 77,073.44 as its 17 components advanced and 13 declined. Intra-day, it surged 699.61 points or 0.91 per cent to 77,318.94.
Moreover, global market trends added to the optimism in domestic markets.
The Nifty Midcap 100 and Nifty Smallcap 100 indices continued to outperform the benchmark indices, showcasing strength in the broader market. Both indices marked their fifth consecutive day of outperforming the main indices.
The Midcap 100 ended the session up by 0.91%, while the Smallcap 100 outperformed further with a rise of 1.09%.
According to Vinod Nair, Head of Research at Geojit Financial Services, the rally was primarily driven by positive sentiment from Asian markets, which supported the Indian market in starting the week on a strong note.
Additionally, the robust earnings from the banking and financial sectors sparked a broad-based rally, with investors anticipating improved earnings in the near future.
However, Nair pointed out that uncertainties regarding Donald Trump’s economic policies and concerns over high oil prices continue to weigh on investor sentiment.
In the global context, Donald Trump’s inauguration as President is seen as a pivotal moment for the markets. His economic policies, aimed at boosting American business competitiveness, have raised concerns among investors.
During his first term, Trump imposed tariffs on major trading partners, particularly China, and this is expected to continue. Investors are wary that his proposed tariff hikes could lead to inflationary pressures and potential trade wars, which have previously stalled market rallies.
At the same time, concerns about the implications of these policies have been somewhat alleviated by recent cooling inflation data in the US, which has prompted renewed speculation about potential rate cuts by the US Federal Reserve.
Meanwhile, the cryptocurrency market has been buoyed by Trump’s win, with Bitcoin reaching new record highs. Trump, once a critic of Bitcoin, has now pledged to make the US the global hub for digital assets, with plans to establish a Bitcoin stockpile.
This has added further momentum to the cryptocurrency rally.
Turning back to the Indian market, the banking sector stood out as the top performer. The stellar performance of Kotak Mahindra Bank, which surged by 9.21%, helped lift the entire banking space.
This marked the largest one-day rally for Kotak Mahindra Bank since October 2021. On the broader scale, the Nifty Private Bank index rose by 2.38%, with eight out of its ten constituents closing in the green.
Similarly, the Nifty PSU Bank index climbed nearly 2%, reflecting positive sentiment in public sector banks as well.
The metal sector also saw a positive performance, as the Nifty Metal index rose by 1.08%. Optimism in the sector was driven by expectations of easing US-China tensions following discussions between Trump and Chinese President Xi Jinping.
These talks raised hopes of improved trade relations, which could help support metal prices, particularly since China is the largest consumer of industrial metals.
However, not all sectors performed equally well. The Nifty Auto index was the worst performer of the day, slipping by 0.52%. The Nifty FMCG sector also saw a mild decline of 0.11%, reflecting a more subdued performance in these areas.
From a technical perspective, market analysts are optimistic about the Indian stock market's near-term prospects. Shrikant Chouhan, Head of Equity Research at Kotak Securities, noted that the market experienced a positive momentum, with the Nifty closing 142 points higher and the Sensex gaining 454 points.
He highlighted that after a brief correction earlier in the day, the market found support at key levels around 23,170 and 76,600, before bouncing back. This higher bottom formation on the charts suggests the possibility of further gains if the indices can sustain above these support levels.
Chouhan further emphasised that the 23,170/76,600 levels would act as key support zones for day traders. If the market maintains its position above these levels, it could move up towards the 23,450-23,500/77,300-77,500 range.
However, if the market falls below these levels, the uptrend could be at risk, prompting traders to consider exiting their long positions.
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