Indian equity indices, Nifty50 and BSE Sensex, opened with positive momentum on Thursday following a sharp decline in the last two trading sessions. Nifty50 was above the 24,500 mark, and BSE Sensex gained over 100 points at the open. However, the indices reversed course by the close, with Nifty50 dropping to 24,426.85, down 74.05 points or 0.30%. Similarly, BSE Sensex ended at 79,809.65, losing 270.92 points or 0.34%.

Market experts are optimistic about domestic market stability, citing ongoing supportive measures like GST reforms, import duty adjustments, and the ‘Swadeshi’ initiative, which are expected to mitigate the impact of global trade uncertainties.

Market Sentiment: FII Shorts and the Impact of Trump’s Tariff Policy

Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments, pointed out that despite a large buying effort from domestic institutional investors (DIIs), which totaled Rs 6,920 crore, the market still declined by 211 points. This, he believes, is due to increasing short positions by foreign institutional investors (FIIs) triggered by negative sentiments from the 50% tariff imposed by the US and high valuations in India. Vijayakumar also mentioned that the market often experiences significant movements in the September series, and a swift decision on the tariff issue could lead to a reversal of sentiments and short covering.

Looking ahead, Vijayakumar remains optimistic about India’s economic growth, which he believes will be supported by fiscal stimulus from the budget, monetary stimulus from interest rate cuts, and the upcoming GST rationalization. He suggests that investors take advantage of market dips to purchase fairly valued stocks in anticipation of a future rally.

Global Market Trends

Thursday’s session also saw record-breaking closes for the S&P 500 and the Dow Jones Industrial Average in the US, following robust AI infrastructure spending, despite Nvidia’s results falling below elevated expectations. Asian markets opened cautiously in response, with global economic resilience being highlighted ahead of the Federal Reserve’s preferred price indicator data to be released on Friday.

Meanwhile, gold prices remained steady on Friday, trading close to their highest levels in over a month. A weaker US dollar and anticipation of a Federal Reserve interest rate cut in September have enhanced gold’s appeal.

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