Here are the factors behind today’s Dalal Street rally:
1) Steel inventories are rising
JSW Steel, Tata Steel and Titan Company were among the biggest gainers in the Nifty 50, rising as much as 5%, while the Nifty Metal index rose over 1% after the government announced a three-year safeguard duty of 12% on imports of certain steel products, aimed at curbing cheap shipments from China.
Steelmakers performed better after the government said it would impose a 12% levy on selected steel imports for three years to protect domestic producers from low-priced overseas supplies.
2) Crude oil is easing
Brent crude, the global oil benchmark, fell 0.10% to $61.27 per barrel. Lower oil prices tend to support Indian equities by easing inflationary pressures.
Oil prices are set to fall more than 10% through 2025, with Brent crude on track for the longest streak of annual declines as global supply exceeds demand despite wars, higher tariffs, OPEC+ production increases and sanctions on Russia, Iran and Venezuela.
Brent futures have fallen nearly 18% this year, the steepest annual decline since 2018, and are expected to post a third consecutive annual loss. The more active March contract fell 6 cents to $61.27 a barrel at 0147 GMT.
3) Value purchases
Following the recent pullback, traders stepped in to buy beaten-down stocks, with the Sensex down for five consecutive sessions and the Nifty down for four sessions, leading to bargain hunting in select counters.
“The market has the potential for upward directional movement, but is being held down by continued selling by foreign institutional investors and the absence of new triggers such as positive developments on the US-India trade front,” said Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments.
4) Technical view
The Nifty’s fall to the 25,850 level sparked bargain hunting interest, although technical indicators are yet to point to a decisive reversal, said Anand James, chief market strategist at Geojit Investments.
“With this goal in mind, we will stick with the bearish view below 25,970, but we will be willing to play upside as we look beyond 26027. Otherwise, expect 25740-650, but such a move is less likely today,” he said.
5) FII long-short ratio
Foreign institutional investors remain cautiously positioned in the derivatives market, with the FII long-short ratio in the new range of 8.84%, well below 15.07% at the start of the November range. The ratio remained below 20% in December, indicating a continued preference for short positions.
An SBI rollover report noted that Nifty futures traded within a narrow range of 632 points during the December range, the tightest since August 2023, highlighting the absence of a clear directional trend. Despite the sideways market, rollovers rose from 68.77% in November to 72.29%, slightly above the three-month average. This indicates that traders were willing to continue their positions even amid moderate price action.
SBI said market-wide rollovers remained stable at 91%, while the continued low FII long-short ratio reflects continued caution among foreign investors despite stable rollovers and subdued volatility.
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