Sensex Stages Dramatic Recovery on Trade Deal Hopes
In a volatile trading session on Monday, the Sensex experienced a dramatic turnaround. The index initially plunged nearly 700 points in early trades, only to reverse all losses by mid-session and close with solid gains. This recovery was fueled by growing optimism about an impending India-US trade deal.
Early Slide and Mid-Session Rebound
The Sensex opened under pressure, dropping sharply in the morning. This early slide was triggered by news that the US Justice Department had opened a criminal probe against Federal Reserve Chairman Jerome Powell. The development sent shockwaves through global financial markets, raising fears of potential interest rate hikes worldwide.
However, sentiment shifted dramatically during the mid-session. The US Ambassador to India announced that an India-US trade deal was nearing closure. This positive news lifted investor confidence, pushing the Sensex higher. The index finally closed at 83,878 points, up 302 points for the day.
Breaking a Losing Streak
Monday's gains marked the first positive session after five consecutive days of losses. During that losing streak, the Sensex had shed nearly 2,200 points, representing a decline of about 2.5%. The recovery provided much-needed relief to market participants.
Vinod Nair, Head of Research at Geojit Investments, commented on the market movement. He noted that the domestic market rebounded from the day's lows as investor sentiment improved following favorable remarks on trade deals by the US Ambassador. This positive undertone provided a lift to overall market sentiment, Nair wrote in a research note.
Investor Wealth and Market Capitalization
At the close of Monday's trading, investors were richer by approximately Rs 1 lakh crore. The Bombay Stock Exchange's total market capitalization now stands at Rs 468.7 lakh crore. This wealth creation reflects the market's positive response to the trade deal developments.
Precious Metals Reach New Highs
The global uncertainty pushed haven assets higher throughout the trading day. Both gold and silver prices hit new highs in domestic and international markets.
Gold prices broke above the $4,600 per ounce mark on Comex in New York. On the Multi Commodity Exchange in India, February futures contracts traded above Rs 1.4 lakh per kilogram.
Silver prices also surged, moving above $85 per ounce on Comex. On the MCX, February futures contracts traded above Rs 2.69 lakh per kilogram.
Currency Market Movements
The US dollar showed weakness against other major currencies. This decline was primarily due to news about the Federal Reserve chief's legal troubles and the possibility of US intervention in Iran. As a result, the dollar index, which measures the greenback's strength against a basket of major currencies, slid about 0.3%.
In the interbank foreign exchange market in India, the rupee strengthened marginally against the dollar. It closed at 90.16, compared to 90.22 on the previous Friday.
Market Outlook and Implications
The day's trading activity highlighted how sensitive markets remain to geopolitical developments and trade negotiations. The early panic selling demonstrated investor concern about global financial stability, while the subsequent recovery showed how positive trade news can quickly change market sentiment.
Market analysts will be closely watching further developments in the India-US trade negotiations. Any concrete progress could provide additional support to Indian markets in the coming sessions. Meanwhile, investors continue to monitor precious metal prices as indicators of global risk appetite and economic uncertainty.
