Trade Setup for April 12: Will US Inflation Data Dampen Nifty’s Momentum Towards 23,000?

As the Nifty and the Nifty Bank gear up for their potential fourth consecutive weekly gain, all eyes are on the upcoming US inflation data, which could influence market sentiment.

The Nifty has showcased resilience throughout the truncated week, posting gains of over 1% across the first three sessions. With the index hovering just around 250 points shy of the crucial 23,000 mark, a close above 22,513 on Friday would mark its fourth consecutive weekly advance.

However, amidst the optimistic backdrop, concerns loom over the impact of the US inflation figures. Recent data revealed that both Consumer Price Inflation (CPI) and core inflation in the US surged beyond expectations, hitting a 4.8% increase in March, marking the highest level in 11 months. The repercussions were felt in the US markets, which saw a decline of over 1% on Wednesday night. Indian equities are likely to mirror these movements when trading resumes after the holiday, reacting to both Wednesday’s and Thursday’s developments.

Adding to the mix is the amendment to India’s Double Taxation Avoidance Agreement with Mauritius, introducing a “Principal Purpose Test” (PPT) to assess whether the primary motive behind the tax arrangement was to exploit treaty benefits. Transactions failing the PPT may be denied these benefits. It’s worth noting that the 2016 amendment to the India-Mauritius Tax Treaty had exempted all investments from Mauritius made until March 31, 2017.

In this dynamic environment, investors are advised to stay vigilant and monitor the unfolding developments closely. The market’s reaction to the US inflation data and the implications of the revised tax treaty with Mauritius will likely shape trading sentiment in the sessions ahead.

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