D-Street likely to raise more toasts to US deal

Synopsis

Indian stock markets are set for a positive start on Monday. This follows the announcement of a broad India-US trade deal over the weekend. Positive global cues, including a strong Wall Street performance, are also supporting the market. Sectors expected to benefit from the deal may see investor interest.

Mumbai: India's equity markets may extend late last week's rally into Monday, buoyed by the announcement of the broad contours of the India-US trade deal over the weekend and an upbeat Wall Street on Friday. Analysts said sectors positioned to benefit from the pact could see investor interest early this week, but a runaway rally in the market looks unlikely as further upsides could revive valuations concerns.

"Markets are likely to react positively at the start of the week, also thanks to the strong global cues," said Sham Chandak, head of institutional equities at Elios Financial Services.

US stocks surged on Friday led by a recovery in technology stocks after the recent selling. The Dow Jones Industrial Average rose 2.47%, closing above the 50,000 level for the first time. The S&P 500 and Nasdaq Composite also jumped around 2%.

In response to the trade deal-related announcements, auto ancillaries, jewellery exporters, textile and apparel exporters, chemical manufacturers, pharmaceuticals and API manufacturers should move higher, said Chandak.

"Indian Made Foreign Liquor (IMFL), breweries and auto manufacturers will likely not move higher, given the potential competition they may face post the deal. The market will probably wait to see the fine print of the final agreement."

The Nifty and Sensex had gained 1.5-1.6% in a six-day event-laden trading week.

"The joint statement is likely to act as the catalyst to trigger a breakout above the 25,500-25,850 range," said Vipin Kumar, AVP - derivatives and technical research at Globe Capital Market. "A sustained trading above 25,850 will mark a bullish breakout that could push indices toward the 26,150-26,200 spot levels in the immediate near term."

Other analysts struck a more cautious note. Siddarth Bhamre, head of institutional research at Asit C Mehta, said much of the upside from the trade deal has already been priced in.

"While sectors such as pharmaceuticals and gems and jewellery could stand to benefit, the inclusion of a clause allowing commitments to be revised if either side fails to comply leaves some uncertainty," he said. "With no clear assurance that all provisions will be fully implemented, investors remain cautious."

JM Financial Institutional Securities said the agreement is a "clear sentiment positive" for Indian equities, particularly export-oriented sectors, but elevated valuations suggest that incremental foreign inflows may be gradual rather than immediate.

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