Stock market: 5 reasons why Sensex, Nifty may extend rally today

Benchmark stock indices Sensex and Nifty look set to rise on Wednesday after the US President Donald Trump, during a White House news conference, said import tariffs on Chinese would come down substantially, even if they would not be zero.

Signs of ease in trade war
The comment came as the US Treasury Secretary Scott Bessent also suggested the high tariffs were unsustainable and that he foresees a de-escalation in the trade war between the world’s two largest economies. The two developments eased concerns over the US-China tensions, sending Wall Street stocks higher. 

Elon Musk & DOGE, Fed 
Add to that are reports suggesting Elon Musk would pull back significantly from DOGE in May and would rather focus on Tesla. The government sector was instrumental in shoring up the US economy in 2023 and 2024, with the US government accounting for 25 per cent of new job additions. Musk's spending cuts and slashing of government workforce were seen hurting the consumer sentiment in the US.  Besides, Trump also hinted that he has no intention of firing the US Fed Chair Jerome Powell.   

Wall Street rally
In overnight trade, Dow Jones settled at 39,186.98, up 1,016.57 points or 2.66 per cent. S&P500 advanced 129.56 points, or 2.51 per cent, to 5,287.76. Nasdaq Composite also climbed 429.52 points, or 2.71 per cent, to 16,300.42. 

Asia rub off
Asian markets had a rub-off, with markets from Hong Kong to Japan rallying up to 1.5 per cent. Gift Nifty also signaled a positive opening for the domestic market. 

To be sure, Sensex and Nifty are up for six trading sessions. They ignored a Wall Street selloff a day ago, even as Trump's signaled that he may remove Jerome Powell from the post of the US Federal Reserve Chair. The US president wants immediate rate cuts. But analysts believe it would do so only when clearer evidence of weakness in employment, consumer spending, and business investment are visible. This has also weakened dollar to a three-year low, boosting flows into emerging markets like India. 

Dollar weakness & FPI inflows
Provisional data available with NSE showed FPI bought shares worth Rs 1,290.43 crore on Tuesday. "The recent turnaround in FII activity, with over $2 billion in Indian equities bought in just four five sessions. After months of outflows, this surge reflects a shift in sentiment—driven by a mix of valuation, macro stability, and sectoral attractiveness," said Narinder Wadhwa, Managing Director & CEO at SKI Capital Services.

Axis Securities said Nifty has historically delivered an average of 1.2 per cent return with an win rate of 80 per cent in the past decade, after rising for at least five days with an average return of 7.7 per cent or higher.