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Informist, Thursday, May 22, 2025

By Gopika Balasubramanium

MUMBAI – Views were mixed on the direction of the equity market Friday after the sharp fall in benchmark indices Thursday. While some analysts expect the equity market to rise marginally, others see the southward journey continuing. Investors will continue to monitor global developments, especially regarding US President Donald Trump's tax and spending bill, which was passed by the House of Representatives by a razor-thin majority.

There are worries about likely pressure from the proposed tax cut and spending bill on the US government debt. The bill, if passed by the Senate, is expected to add $3.8 trillion to the country's fiscal deficit of over $36 trillion. The bill, along with tariffs, is expected to push US inflation higher, which will likely delay the interest rate cuts in the country. 

"If my returns are higher from the (US) treasury bonds, why would I look at any other markets?" Ajit Mishra, head of equity technical research at Religare Broking, said. Another factor that needs to be monitored is the flows from foreign investors into the Indian stock market. There have been worries about the US credit profile, which deepened after Moody's Ratings downgraded the country's perfect credit rating of Aaa to Aa1 last week. This has been pushing US Treasury yields higher. The rise in yields makes US Treasury bonds more attractive for foreign investors, leading to worries that investors may shift their investments from emerging markets, analysts said. 

There are worries that FIIs may shift to other emerging markets such as China amid its cooling trade relations with the US. "This is all a game of perception, and it is very unlikely that they (FIIs) would pull out all the funds from India," Mishra said. It is also very early to determine this, Mishra said, adding that fresh investments may shift to Chinese markets, not the already invested funds.

For the short term, bias is bearish and traders are advised to take a 'buy-on-dips' strategy only if the Nifty 50 closes above 24800 points, Nandish Shah, senior technical analyst at HDFC Securities, said. On Thursday, the Nifty 50 and Sensex closed 0.8% lower each at 24609.70 points and 80951.99 points, respectively. The Nifty 50 is expected to find support at 24400-24100 levels and resistance at 25200 points. On the domestic front, most factors are positive, Mishra said, adding that there have been no positive or negative surprises from the March quarter earnings so far. 

JSW Steel is the only Nifty 50 constituent that will report quarterly earnings Friday. The impact of a fall in prices due to pressure from cheap steel imports from China is expected to have hit the year-on-year sales growth of JSW Steel in the March quarter. The company's revenue is seen declining 3% on year while net profit is expected to rise 41%. Thursday, shares of the steel maker closed 0.5% higher at INR 1,005.60.  End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Saji George Titus

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