The Indian stock market continued its upward trajectory, marking the sixth consecutive day of gains, buoyed by positive developments in US-India trade negotiations and sector-specific optimism.

Market Performance

The benchmark indices closed in the green, with the S&P BSE Sensex rising 323.83 points (0.40%) to 81,425.15, while the NSE Nifty 50 added 104.50 points (0.42%) to end at 24,973.10. This sustained rally reflects growing investor confidence in the Indian market.

US-India Trade Talks

The market sentiment was bolstered by US President Donald Trump's statement that his administration is continuing negotiations to address trade barriers with India. Trump's announcement of plans to speak with Prime Minister Narendra Modi further fueled optimism about potential trade developments between the two nations.

Sector-wise Performance

IT Sector Surge

The Information Technology sector emerged as a significant gainer, rising 5.50% over two sessions. This uptick was primarily driven by expectations of a potential US Federal Reserve rate cut, which typically benefits IT companies with substantial US exposure.

Textile and Seafood Exports

Textile companies saw substantial gains, with stocks like Welspun Living, Vardhman Textiles, Trident, and Arvind climbing between 3.70% and 10.00%. The optimism surrounding potential trade deals contributed to this sector's strong performance.

Seafood exporters also witnessed a remarkable surge. Apex Frozen and Avanti Feed jumped by 15.70% and 14.80% respectively, boosted not only by trade optimism but also by the European Union's clearance of 102 additional Indian fishery establishments for exports.

Top Performers

Several stocks led the Sensex gains:

Broader Market Trends

The rally was not limited to large-cap stocks. Broader markets also participated in the upswing:

• Small-cap index: Up 0.70%
• Mid-cap index: Added 0.90%

This broad-based rally indicates a healthy market sentiment across various segments of the Indian equity market.

The ongoing positive momentum in the Indian stock market, driven by a combination of global cues and domestic factors, continues to attract investor interest. As trade talks progress and sector-specific developments unfold, market participants will be closely watching for further opportunities and potential impacts on various industries.

Indian stock markets closed at two-week highs on Tuesday, driven by a surge in IT stocks following Infosys's announcement to consider a share buyback. The Nifty 50 rose 0.38% to 24,869, while the Sensex gained 314 points to 81,101. The Nifty IT index jumped 3% in its best session in nearly two months, with Infosys leading gains at 5% after announcing its board would meet on September 11 to consider a buyback proposal.

Other IT majors including Wipro, Tech Mahindra, HCLTech and TCS rose 2-3%. Auto stocks continued their positive momentum with Maruti Suzuki and Eicher Motors up 1% each. Kotak Mahindra Bank rebounded sharply on reports of potential ₹6,000 crore block deals. RailTel surged 6% after securing a ₹660 crore order from Bihar Education Project Council. However, new-age companies like Paytm, Nykaa and Delhivery declined 2-3%, while Trent remained the top Nifty loser for the second consecutive day.

Meanwhile, Jefferies, a prominent global investment bank, maintains an optimistic stance on India's long-term growth prospects, despite the country's underperformance in emerging markets this year. The firm's analysis highlights both challenges and opportunities in the Indian stock market, painting a nuanced picture for investors.

Market Performance and Challenges

The Indian market has faced several headwinds in the recent past:

• Negative Foreign Portfolio Investment (FPI) flows
• Uncertainty surrounding tariffs
• Subdued sentiment in domestic mutual funds

These factors have contributed to a decline across various market segments:

Positive Indicators

Despite these challenges, Jefferies points to several positive factors that support their bullish long-term outlook:

• Easing of downgrades in the market
• Price-to-Earnings Growth (PE/G) ratios aligning with regional peers
• Normalized growth expectations, with a projected 10.00% Earnings Per Share (EPS) Compound Annual Growth Rate (CAGR) for FY26-27

Focus on Small and Midcap Segments

Jefferies expresses particular interest in the small and midcap segments of the Indian market. The brokerage notes that these segments offer:

• Higher EPS growth compared to other Asian and Emerging Markets
• Lower PE/G ratios than large caps, potentially indicating better value

Investment Strategies

In light of the current market conditions, Jefferies recommends the following strategies:

1. Avoid extreme factor exposure
2. Focus on:
   • Compounders (stocks with consistent growth)
   • Value laggards (undervalued stocks with potential)
   • Multibagger opportunities (stocks with potential for significant returns)

New Long-Short Strategies

Following recent regulatory changes, Jefferies has introduced long-short strategies for Specialized Investment Funds. This move aims to capitalize on market inefficiencies and provide additional alpha-generating opportunities for investors.

Conclusion

While the Indian market faces near-term challenges, Jefferies' analysis suggests that long-term alpha opportunities remain abundant. The firm's bullish outlook, particularly on small and midcap segments, coupled with its strategic recommendations, provides investors with a framework for navigating the current market landscape. As always, investors should conduct their own research and consider their risk tolerance when making investment decisions.