Opening Bell - 05 / 02 / 25

Stock Market Updates

Opening Bell - Daily Morning Commentary

Trade Optimism & and FII Short Covering Boost Markets

The three major stock indexes closed higher on Tuesday, aided by energy stocks, while investors saw reason for optimism for a trade breakthrough between the U.S. and China after President Donald Trump delayed tariffs for Canada and Mexico.

After signing an executive order to impose 25% tariffs on imported goods from Canada and Mexico, President Donald Trump reached an agreement on Monday with both countries to delay tariffs by one month. A 10% tariff on goods imported from China went into effect overnight, with China retaliating with tariffs on select U.S. exports. However, the situation remains fluid and negotiations between both countries are ongoing.

Market leadership favoured growth-style sectors, such as technology and communication services, while defensive sectors, such as consumer staples and utilities, were among the laggards.

While tariff news dominated headlines yesterday, the ISM Manufacturing PMI rose to its highest since September 2022. JOLTS job openings report provided further evidence that labour-market conditions are normalizing after a period of historic strength but remain healthy.

A rebound in manufacturing activity along with a healthy labour-market should bode well for economic growth, helping extend the current expansion.

Of the 211 companies in the S&P 500 that have reported earnings for the fourth quarter, 76.8% reported above analyst expectations. Alphabet posted revenue that missed expectations after the close, partly due to a slowdown in its cloud computing business. The stock was down more than 7% in after-market trading.

Asian stocks rose as traders navigated their way through a US-China trade war and earnings from Wall Street’s big tech companies. Chinese markets are set to reopen after week-long Lunar New Year holiday.

In a significant market rally on February 4, Indian equity benchmarks demonstrated robust performance, with both the Sensex and Nifty recording substantial gains of nearly 2 percent. As we anticipated, Foreign Institutional Investors (FIIs) engaged in substantial short covering in the Index Futures segment yesterday, with net buying of Rs 5,354 crore. FIIs still maintain 83% of their Index Futures positions on the short side, suggesting significant potential for additional short covering in the coming days—a positive indicator for market momentum. Notably, in the cash segment, foreign investors turned net buyers for the first time since January 2nd.

The Nifty surpassed both its 50 and 200-day exponential moving averages on a closing basis yesterday. A downward-sloping trendline connecting the September 2024 all-time high and subsequent lower highs of December 2024 comes in between 23,750 and 23,800. It would act as a strong resistance. A breakthrough above 23,800 could potentially catalyse further upward momentum towards the 24,200 level. The index finds immediate support at 23,500.

Indian markets are likely to open mildly higher on back of positive global cues.