The opening of domestic markets is expected to be positive following the dovish comments from the US Fed. A Gift Nifty at 23,080 suggests a gap-up opening of about 100 points for Nifty. Asian markets are also up in early trade on Thursday, indicating a positive sentiment across the board.
Analysts anticipate the market to remain in consolidation mode with active participation from small and mid-cap stocks. They believe that the market will exhibit strong resilience if FPIs return as buyers, despite expecting a slight moderation in their selling in the near term.
In the US, the Federal Reserve decided to keep interest rates steady on Wednesday, maintaining its benchmark rate at 4.25-4.5 per cent, as widely anticipated. Policymakers hinted at a potential half-percentage point reduction in borrowing costs by the end of the year. However, the central bank raised its projection of US inflation for 2025 while lowering the US economic growth forecast.
Analysts foresee the market continuing its momentum amid positive signals from FIIs and sustained domestic buying.
ICICI Securities pointed out that the Nifty/Dow Jones ratio chart has broken out from a six-month falling channel, suggesting that the domestic market could outperform US equities in the future. The Nifty is currently around 6 per cent below its 52-week EMA, indicating a potential recovery. Additionally, the cooling off in US 10-year Yields, Dollar Index, and Brent crude is favorable for emerging markets by easing inflation and boosting sentiment.
Bajaj Broking Research noted that the Nifty extended its upward movement for the third consecutive session and closed above 22,900 levels. The index formed a small bull candle on the daily chart, signaling consolidation with a positive bias after a strong rally on Tuesday. The immediate support is placed at 22,500-22,600 levels, with resistance at 23,000-23,200 levels.
On the broader market front, the Midcap and Small-cap indices showed strength near the 61.80 per cent retracement levels, with buying demand from a decade-long trendline and a positive RSI divergence. ICICI Securities suggested focusing on accumulating quality stocks in a staggered manner.
Overall, the market is expected to see positive momentum with potential for further upside, especially if FPIs increase their buying activity and domestic participation remains strong.
