The reciprocal tariff escalation from the trade war, along with ongoing negotiations for a deal with the US, has created a mixed situation in the market. The market has become uncertain for both bullish and bearish traders.
Today, the market opened with a gap of nearly 200 points, but it failed to sustain that movement and remained mostly flat throughout the session. However, after 11 AM, the index surged again and closed with a gain of around 374 points, ending near 22,535.
Global market analysis
Trump on trade policy
Trump has announced that a clear policy will be introduced regarding the ongoing tariffs. This comes amid circulating news that the US might pause the 90-day period related to the reciprocal tariffs. However, the White House has confirmed that no such pause will take place.
Additionally, more than 70 countries have approached the US to negotiate trade deals for the future.
EU on tariffs
A report has emerged stating that the European Union has announced its intention to negotiate with the Trump administration rather than escalate tensions. This is seen as a positive development, especially considering that earlier, the EU Commissioner had stated they would retaliate if Trump imposed tariffs. Now, with retaliation off the table and a trade deal being considered instead, it marks a significantly positive step forward.
As a result, the Nasdaq surged nearly 3% today following this news. Additionally, nearly 70 countries have approached the US to discuss potential trade negotiations. The outcome of these negotiations will shape the future of global trade, with both the US and its trading partners taking constructive steps toward forming new trade agreements and setups.
Domestic market analysis
The market had a strong rally today, gaining around 1.69% with an increase of over 350 points. This reflects strength in the market and suggests that the impact of tariffs is not currently a major concern for the Indian stock market. However, it remains to be seen how things unfold, as Indian markets are still at elevated levels, indicating ongoing volatility.
This means we can expect significant swings in both directions—upside and downside. Until this volatility settles down, the upcoming trade setups will remain uncertain and should be approached with caution.
Currency and commodity market analysis
The USD/INR currency pair has shown a reversal in its recent pattern. After falling sharply from a high of 88 to a low of 85, the rupee weakened again over the past three trading sessions, bouncing back to around 86.23. This recent depreciation of the rupee is seen as a negative development.
Meanwhile, in the commodity market, both gold and silver are experiencing choppy movements, fluctuating in both directions. On the other hand, crude oil prices have seen a significant decline, recently hitting a three-year low. This sharp drop in crude prices is likely to benefit the Indian economy by easing inflationary pressures and helping the government manage the trade deficit more effectively.
FII& DII ANALYSIS
The data from FIIs is also raising concerns, as they have once again turned net sellers today, offloading nearly ₹5,000 crore in the Indian cash market. This continues the trend of consistent selling throughout this month. What’s more concerning is that DIIs are not matching this selling pressure with equally strong buying, which is disrupting the balance in the market.
Despite this, the market managed to rally around 350 points today, showing resilience in the face of heavy FII selling.
Option chain analysis
In yesterday’s trade setup, we discussed that the option chain was showing relatively low volume, as traders remain uncertain about the Indian stock market due to global cues. The market’s volatility and frequent ups and downs are creating hurdles for traders.
Looking at the near-term option writing, the highest call writing can be seen at the 22,800 level with 66,458 open interest. On the put side, the highest writing is at the 22,500 level with an open interest of around 88,027. This indicates that while overall option volumes are currently low, there is potential for volume to increase in the near future as the market begins to show more resilience.
Nifty 50 prediction
As we discussed in previous blogs, the 22,000 level has proven to be a strong support zone. Once again, the market respected this level, opening with a gap-up following positive cues from the Asian markets and then continuing its upward move.
However, we need to remain technically cautious. Today, Nifty formed a Doji candlestick pattern, which often signals a potential reversal. This makes tomorrow’s trade setup crucial and challenging. To confirm further bullish momentum, the index must break above today’s high. If it does, we may see a move towards the next key resistance levels in the 22,300–23,000 range.
That said, crossing and sustaining above these levels will be a hurdle, and the market’s ability to hold above them will determine the strength of the upcoming trend.
Also read; Technical analysis; Difference between technical and fundamental analysis
Conclusion
Following the NASDAQ, which surged more than 3%, and the strong movement in Gift nifty, the market showed positive momentum. However, caution is still warranted. The Doji candle formed on the daily timeframe is acting as a potential hurdle, signaling indecision and the possibility of a reversal.
As previously discussed, India VIX has recently surged, indicating heightened volatility in the near term. This elevated VIX is keeping option premiums high, which could lead to significant option decay if the market stabilizes or moves sideways.
It will be challenging for the market to break above today’s high, which coincides with the high of the Doji candle. On the downside, the 22,000 level continues to act as a strong support zone.
