A softening of stance by China in its trade war against the US is likely to be one of the major triggers for equity markets to rally in the coming days.

Major global equity indices rose on Wednesday as China broke the ice and announced that it is ready to strike a partial trade deal involving the purchase of agriculture goods from the US. This also saw a nearly 1 per cent jump in US stock futures. China reportedly offered to increase soyabean purchases to 30 billion tonnes from 20 billion tonnes. High-level talks will continue this week between the two nations.

BusinessLine had reported on October 5 that the markets would focus on a US-China trade deal for further cues.

Sharp bounces

Back home, the Sensex and the Nifty witnessed sharp bounces as sentiments improved on the back of the government’s pre-Diwali announcement of a 5 per cent hike in the dearness allowance of its employees. The move could benefit nearly 50 lakh employees to the tune of ₹16,000 crore every year, reports suggested. Markets took the announcement positively as it could create more demand in the economy.

The Sensex rose 645 points, or 1.72 per cent, to close at 38,177. The Nifty gained 186.9 points, or 1.68 per cent, to close at 11,313. According to market technical analysts, the Nifty could see sharp gains if it breaks the 11,400 levels decisively.

According to Chandan Taparia, technical and derivative analyst at Motilal Oswal Financial Services, the Nifty has to hold above 11,250 to extend gains towards 11,400-11,450; the major downside support is at 11,100.

Markets could also be watching the second-quarter earnings to be reported by large companies and banks later this month. Analysts see earnings showing an uptick mainly due to the low base effect of the past few quarters.

 

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