Sensex, Nifty & Trump: Why stock market is rising today

Benchmark stock indices Sensex and Nifty rallied on Tuesday morning, even as concerns over Trump’s ‘aggressive’ trade policies loom large. This is the classic case of ‘Buy on rumours and sell on news’. Dollar index fell over a per cent, the 10-year US bond yield eased and Asian markets gained in the early trade. 

Trump trade has peaked, said V K Vijayakumar of Geojit Financial Services adding that the decline in US bond yields and the dollar index are indications of this. 

“This downshift in the dollar index and bond yields has been assisted by the lower-than-expected CPI inflation in the US, again igniting hopes of more rate cuts by the Fed this year. Hope of an end to the conflict in Gaza is another major relief. This global backdrop is positive for the market,” he said.

UBS said US President Trump’s policy agenda — if enacted in its entirety—would have significant macroeconomic repercussions. But financial and political constraints are likely to mean that enacted policy risks falling short of campaign pledges in some instances. 

The BSE Sensex rose 188.28 points, or 0.24 per cent, at 77,261.72. The NSE Nifty stood at 3,421.65, up 76.90 points or 0.33 per cent. “There is also the consideration that the President may escalate to deescalate, with some of his proposals likely to prove to be negotiating tactics,” UBS said.

UltraTech Cement rose 2.22 per cent to Rs 10,859.75. Sun Pharma gained 1.14 per cent to Rs 1,796.10 ahead of Q3 earnings, HCL Tech, Tata Motors and Nestle India added up to 0.80 per cent. Bajaj Finserv, L&T and Infosys were among other Sensex gainers.

Zomato shares fell 7 per cent to Rs 224.05. This was in addition to a similar fall in the previous session. Macquarie sees 44 per cent downside over Monday’s closing price, saying Zomato’s December quarter earnings were below consensus and its estimates, driven by investments in Blinkit and higher employee expenses.  Macquarie said it regards Zomato as an efficient quick commerce and food delivery platform, but for the shares we see limited margin of safety.

ITC added 0.72 per cent to Rs 440.90.  Nuvama Institutional Equities sees a low probability of a sharp hike in cigarette tax in the Budget as a small tax hike was taken last year and legal cigarette volumes are gradually recovering despite an urban slowdown.

Trump & Stocks to watch

Nomura expects Trump to largely follow through on his campaign promise, but the proposals are likely to be softened, especially for tariffs on Canada and Mexico. “We expect Chinese tariffs to be raised by 35 percentage points cumulatively,” it said. 

IRA reduction, a slow down the US solar capacity addition, should hurt Indian exports and would be negative for Indian module manufacturers. If there is no change in IRA but an increase in import tariffs, exports from India will be less viable, and module prices in the US will increase  against the rest of the world. “This will benefit Indian companies who are setting up plants in the US. Both Waaree Energies and Premier Energies are setting up  facilities in the US. Higher US module prices will benefit these US units,” Axis Securities said.

An increase in drilling off the US coast and on Federal land would be positive for Welspun Corp, Axis Securities said.

In the case of industrial metals, Canada and Mexico are major suppliers of  steel and aluminium to the US. Imposing duty will increase US HRC steel prices against the rest of the world and increase aluminium metal premiums in the US. Some exports  will be diverted to other countries, putting pressure on prices.

“Dollar index could remain strong, impacting base metal  prices. However, the impact on each metal must be  assessed in relation to other factors, including supply  and demand drivers and Chinese stimulus. We prefers aluminium stocks over steel. Aluminium spot prices are strong despite a rally in the dollar index. Vedanta, NALCO and Hindalco are its preferred names in that order,” it said.