Stock market today: Will Wall Street's sell-off break Dalal Street's rally?

GIFT Nifty was trading at 24,430.50, down 169 points or 0.69%, at 8:21 am on Friday. The index's movement suggested that the Nifty could open lower, potentially giving back some of the gains recorded in the previous session.

In Short

• Indian markets may open weaker after Wall Street sell-off
• Sensex rose 2.6% and Nifty gained 2.4% on Thursday
• Concerns over AI stocks and US politics hit global sentiment

After a strong rally in the previous session, Indian stock markets could face a tougher start on Friday as a sharp sell-off on Wall Street weighs on global investor sentiment. The rout in US technology and semiconductor stocks has raised concerns about a possible correction in global equities, while early signals from GIFT Nifty point to a weaker opening for domestic benchmarks.

GIFT Nifty was trading at 24,430.50, down 169 points or 0.69%, at 8:21 am on Friday. The index's movement suggested that the Nifty could open lower, potentially giving back some of the gains recorded in the previous session.

On Thursday, the BSE Sensex had surged 2,008.61 points, or 2.60%, to close at 79,310.01. The NSE Nifty 50 ended at 24,536.60, gaining 576 points or 2.40%.

The key question now is whether the global sell-off will trigger profit-booking in Indian equities or whether domestic buying interest and the recent improvement in sentiment will help limit the damage.

WHY ARE GLOBAL MARKETS UNDER PRESSURE?

Wall Street witnessed a sharp sell-off on Thursday, with the Nasdaq 100 plunging more than 6% in its worst session since March 2020. The S&P 500 fell 4.4%, while the Philadelphia Semiconductor Index dropped 12%.

The selling was led by concerns around artificial intelligence stocks and the possibility that a change in the US political environment could affect the pace of investment in AI infrastructure and data centres.

Investors had initially welcomed the Democrats' sweeping victory in the US congressional elections, expecting it to limit Trump's policy actions and potentially improve the chances of de-escalation in the Iran conflict. However, sentiment changed as concerns grew that greater scrutiny of AI infrastructure and data-centre expansion could affect companies that have benefited from the AI spending boom.

The sharp fall in US stocks could weigh on sentiment across Asian markets, including India, as investors reassess their exposure to riskier assets.

GIFT NIFTY SIGNALS A WEAK OPENING

Gaurav Udani, Founder of Thincredblu Securities, expects the Nifty to open around 24,400, down nearly 140 points, indicating possible profit-booking after the recent rally.

"The key will be whether the index manages to hold on to the gains accumulated over the last few sessions or sees further consolidation," he said.

The early indication from GIFT Nifty suggests that Indian benchmarks could begin Friday's session on a cautious note.

At 8:21 am, GIFT Nifty was at 24,430.50, down 169 points or 0.69%. This points to the possibility of a gap-down opening for the Nifty, although the actual opening and direction of the market will depend on buying and selling activity once trading begins.

The recent rally could also make the market more vulnerable to profit-booking. After Thursday's sharp gains, some investors may look to lock in profits, particularly if global cues remain weak.

Udani has identified the 24,250-24,300 zone as an immediate support area for the Nifty, while resistance is placed at 24,500-24,550.

Despite the expected weak opening, he believes the broader market momentum remains positive. He said a healthy correction could provide fresh buying opportunities if the index stabilises around its support levels.

"Traders should avoid panic selling at the opening and look for buying opportunities on dips, provided the index stabilises around support," Udani said.

He added that a recovery above 24,500 could help restore positive momentum, while a decisive break below the support zone could lead to deeper profit-booking.

WILL THE RECENT RALLY BREAK?

The sharp correction on Wall Street raises the risk of a weak start for Indian equities, but it does not necessarily mean that the domestic market's recent rally is over.

Indian markets have been supported by a combination of falling crude oil prices, renewed foreign investor buying and hopes of easing geopolitical and trade-related uncertainty following the US midterm elections.

These factors could continue to provide some support if they remain favourable. However, the global sell-off may encourage investors to book profits after the sharp gains recorded on Thursday.

The immediate focus will be on whether the Nifty can hold the 24,250-24,300 support zone identified by Udani. A sustained recovery above 24,500 could help the index regain momentum, while a break below support may deepen the correction.

For now, GIFT Nifty points to a cautious start, but the extent of the impact from Wall Street's sell-off will become clearer as domestic trading progresses.

(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)

- Ends