Opening Bell - Morning Commentary

U.S. Markets Retreat as Investors Reassess Recent Optimism

U.S. equity markets closed modestly lower Tuesday during a session marked by minimal economic data releases. The pullback follows a robust rebound over the past month, prompting investors to question the sustainability of recent optimism fuelled by apparent easing in trade tensions and inflation concerns.

Technology stocks have been the primary drivers of recent market gains and have experienced broad declines. Industry leaders Nvidia, Apple, and Microsoft all closed in negative territory. The sector dropped 0.5% as investors locked in profits following the extended rally and sentiment shifted amid renewed macroeconomic uncertainties.

Notable movements within the S&P 500 included a sharp decline in FICO shares following heightened regulatory scrutiny, while Moderna surged on favourable vaccine guidance. Defensive sectors, including healthcare and consumer staples, outperformed the broader market, reflecting investors' increasing preference for safer assets amid growing economic uncertainty.

Over recent weeks, easing trade tensions and persistently robust economic data have fuelled a remarkable 20% rally in the S&P 500 since its April 8 low. U.S. small- and mid-cap equities have exhibited powerful momentum during this period, with the Russell Mid-cap Index advancing 21% since April 8, while the Russell 2000 Index, which tracks smaller companies, has gained 19.5% from its recent bottom. This balanced performance across market segments suggests a broad-based economic recovery rather than one concentrated in a few large companies.

Despite the temporary suspension of specific U.S.-China tariffs, investors continue to doubt the longevity of trade relief measures. Additional concerns centre around President Trump's proposed tax cuts, which critics suggest could significantly increase the federal deficit. Market apprehension intensified as major retailers like Walmart cautioned about potential price increases, further stoking inflation worries.

Oil prices jumped more than 1% on Wednesday following reports that Israel is preparing to strike Iranian nuclear facilities, heightening concerns that conflict could disrupt supply chains in the critical Middle East production region.

Asia-Pacific equities advanced today despite Wall Street ending its six-day winning streak. Stock benchmarks in Japan, South Korea, and Australia gained ground, pushing a broader index of regional shares up 0.4% in early trading.

Indian equity benchmarks declined sharply yesterday amid reports of increasing COVID-19 cases in Southeast Asian countries like Singapore and Hong Kong. The Nifty fell for the third consecutive session, shedding 261 points (1.05%) to close at 24,683, while the BSE Sensex dropped 873 points (1.06%) to 81,186.

Japanese bond sell-off has elevated borrowing costs, contributing to global market uncertainty and dampening risk appetite.

Technically, Nifty closed below its 5-day EMA for the first time since May 8, 2025, suggesting a shift to profit-booking. Support levels lie at 24,494 and 24,378, while resistance is expected in the 24,800-24,900 range.

In the absence of strong global cues, Indian markets are likely to pick up from where they left off yesterday.

Opening Bell - Morning Commentary

Japan's PM Raises Alarm on Economic Challenges, Late U.S. Market Recovery to Boost Our Markets' Opening.

US stocks recovered from steep early-session losses and closed slightly higher on Monday. Investors digested news that a major ratings agency had downgraded its U.S. federal government debt assessment. The major averages climbed well off their session lows before ending the day modestly higher. The 10-year Treasury shot up to 4.56% early Monday, its highest intraday level in over a month. However, it was at 4.45% in late trading, little changed from its close on Friday.

On the U.S. economic front, the Conference Board released a report showing that its reading on leading U.S. economic indicators slumped more than expected in April. The report said the leading economic index tumbled by 1.0 per cent in April after sliding by a downwardly revised 0.8 per cent in March. Economists had expected the leading economic index to decrease by 0.8 per cent compared to the 0.7 per cent drop originally reported for the previous month.

U.S. Federal Reserve officials took on cautiously the ramifications of the latest downgrade of the U.S. government’s credit rating and unsettled market conditions as they continued to navigate a very uncertain economic environment.

Japanese Prime Minister Shigeru Ishiba has firmly rejected the idea of tax cuts funded through additional debt issuance, warning that Japan’s fiscal health is in a worse state than Greece's. Speaking in Parliament, Ishiba noted that the country is witnessing a shift toward positive interest rates, citing recent moves by the central bank to unwind its decades-long stimulus policy. Japan’s 10-year government bond yield climbed to a six-week high of 1.48%, while the 30-year yield eased to 2.87%.

China’s industrial production in April grew 6.1% YoY, surpassing expectations of 5.7%, though slightly down from the 7.7% rise recorded in March. However, retail sales disappointed, rising only 5.1% YoY compared to a forecast of 6.0% and slower than March’s 5.9% growth.

Nifty fell for the second day in a row on Monday amid weak global cues. The Indian Rupee exhibited strength, appreciating by 10 paise against the greenback to settle at 85.40. This upward movement in the rupee can be attributed to cooling crude oil prices and a softening of the US dollar.

Nifty is placed above all key moving averages, indicating the continuation of an uptrend. Immediate support for the Nifty is seen in the band of 24750-24800, while positional support stands at 24500. On the upside, resistance is placed at 25116 and 25207.

U.S. futures had suggested a soft opening for American markets when our markets closed yesterday. However, U.S. markets ultimately recovered all their early losses by the closing bell, and hence our markets are expected to open with 0.5% gains today.

Opening Bell - Morning Commentary

US Credit Rating Downgrade to Temper Global Market Sentiment, Local Small and Midcap Stocks are likely to Remain Resilient.

Moody’s Investors Service cut the United States' credit rating, citing concerns over rising debt and political deadlock. This is a jolt to US markets, though it may not impact it immediately, as Moody’s is the last of the three major credit agencies to maintain a top-tier rating for the US.

In the long run, the US establishment must take corrective measures, as a failed or significantly undersubscribed Treasury auction would represent a severe shock to global financial markets. Such an event could precipitate a crisis of confidence in US government debt, potentially leading to sharp increases in borrowing costs across the economy and rapid asset repricing in equity and corporate debt markets.

Last week, Indian equity markets experienced a significant rally, easing geopolitical tensions and upbeat global cues. The U.S. stock market experienced a strong rebound, recovering much of the ground lost during the April tariff-induced selloff. Most U.S. stocks’ weekly gains came following trade negotiations between the world’s two largest economies. U.S. and Chinese negotiators agreed to sharply reduce rates for many recently introduced tariffs for 90 days while pursuing further talks that could result in a longer-term agreement.

Continuous institutional buying in cash markets, FPIs' net short positions in the index markets, and positive surprises on Q4FY25 earnings season in select stocks make us believe that broad-based growth may give way to more sector and stock-specific performance in the coming periods.

The Nifty registered a rally of more than 4% last week, backed by strong broader markets. The Nifty Midcap100, Smallcap100, and Microcap250 indices outperformed the Nifty by soaring 7.21%, 9.17%, and 9.99%, respectively. The next resistance for the Nifty is seen in the band of 25200-25300, where 76.4% and 78.6% retracement levels are placed, respectively. Previous resistance of 24545, derived by 61.8% retracement, is expected to interchange its role as a support going forward for Nifty.

Indian markets are poised to open cautiously in response to sobering signals from US market futures following the sovereign ratings downgrade, though local small and midcap stocks are expected to maintain their resilience.