The Indian stock market‘s sentiment turned positive after logging its best week in the last six months, driven by the Reserve Bank of India (RBI)‘s liquidity boost and the return of foreign capital inflow just before year-end.
In the second week of December, investors will closely monitor key market triggers, including domestic and global macroeconomic data, primary market action, foreign fund inflow, Russia-Ukraine geopolitical tensions, US bond yields, the US dollar, crude oil prices, and other global cues.
In the previous session, domestic benchmark indices Sensex and Nifty 50 extended their recovery for the third consecutive week, gaining over two per cent amid mixed cues. Nifty 50 ended the previous session with a minor loss of 0.12 per cent at 24,677 but logged a sharp weekly gain of 2.27 per cent.
The Sensex closed with a slight drop of 0.07 per cent at 81,709, wrapping up the week with a notable gain of 2.39 per cent. Hence, the Nifty and Sensex added 2.3 per cent and 2.4 per cent, respectively, this week, their best since early June when the general election results confirmed policy continuity.
The sentiment turned positive early on, as weaker-than-expected GDP data raised hopes for RBI intervention, which materialized with a 50-basis-point cash reserve ratio (CRR) cut during the policy meeting, while the repo rate remained unchanged. Renewed buying by foreign investors, following a prolonged period of selling, further bolstered market confidence.
Also Read: Investment strategy: How to invest in 2025 after Sensex, Nifty 50 deliver 13% returns in 2024?
“The week started on a positive note. However, the euphoria was changed in the middle of the week, when foreign investors bought heavily in the cash market, and at the end of the week, they became the net buyers…Despite this, markets on Friday, the market snapped a five-day gaining streak,” said Pravesh Gour, Senior Technical Analyst at Swastika Investmart Ltd.
All major sectors contributed to the rally, with realty, metal, IT, and banking emerging as top gainers while FMCG underperformed. The broader indices also impressed, as mid- and smallcap indices surged over four per cent, surprising market participants. The Nifty Smallcap 100 index extended its winning streak for the 11th consecutive session.
“The RBI expressed confidence in stronger demand and industrial growth, supported by increased government spending and improved rural demand. However, persistent inflation has delayed the possibility of a rate cut until February 2025. The India VIX, or India Volatility Index, which measures expected volatility in the stock market, fell this week to 14.14,” said Puneet Singhania, Director at Master Trust Group.
The market maintained a positive bias throughout the week as the core sector output in October and stability in service PMI data show signs of recovery. Further, a positive turnaround from foreign investors to India in expectation of a dovish monetary policy by RBI supported the sentiment.
“Investors are accumulating the momentum stocks as the expected pick-up in the government capex may provide impetus to infra, capital goods, realty, cement, and metals in H2FY25. PSU banks outperformed on the liquidity boost. The February policy outlook turned positive as inflation will likely moderate in Q4, supported by seasonal corrections in vegetable prices, kharif harvest arrivals, and anticipated rabi output,” said Vinod Nair, Head of Research, Geojit Financial Services.
This week, the primary market will witness intense action as some new initial public offerings (IPO) and important listings are slated across the mainboard and small and medium enterprises (SME) segments. The week will be critical from the domestic and technical point of view as investors will track domestic developments, global markets and macroeconomic data.
Here are the key triggers for stock markets in the coming week:
Domestic macroeconomic data
With no major events on the horizon, market attention is expected to turn towards macroeconomic indicators like the index of industrial production and consumer price index (CPI)-based inflation. The RBI governor highlighted the critical need to manage inflation in his recent speech, suggesting that a potential easing of inflation and continued sluggishness in growth could create room for a rate cut in the next policy meeting.
11 new IPOs, 3 listings to hit D-Street
In the mainboard segment, five new public issues will open for subscription this week: Vishal Mega Mart IPO, Sai Life Sciences IPO, Mobikwik IPO, Inventurus Knowledge Solutions IPO, and International Gemmological Institute IPO. Six new public issues will open for bidding this week in the SME segment.
Also Read: Vishal Mega Mart IPO: GMP, date, price, review, other details as upcoming IPO opens next week
Among listings, Property Share Investment Trust SM REIT shares will debut on the BSE and NSE on December 9, 2024. Additionally, shares of two SMEs will be listed on either the BSE SME or the NSE SME.
FII Activity
Foreign institutional investors (FIIs) were net buyers this week, buying equities worth ₹11,933.59 crore and ₹13,726 crore in cash market purchases, while domestic institutional investors (DIIs) bought equities worth ₹1,792.47 crore. The trend of FII inflows, following their recent buying spree, will remain a key focal point for market participants.
Foreign portfolio investors (FPIs) also took a sharp U-turn and turned net buyers for Indian shares in December, snapping their robust two-month selling streak. According to the National Securities Depository Ltd (NSDL), FPIs invested ₹24, 454 crore worth of Indian equities, and the net inflows stood at ₹34,772 crore as of December 6, taking into account debt, hybrid, debt-VRR, and equities.
“FIIs turning buyers in December, in a total reversal of their sustained selling strategy during the last two months, has altered the market sentiments in favour of the bulls. Encouraged by the FII buying, retail investors, too, have jumped onto the buying bandwagon,” said Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Also Read: FPIs turn buyers in second half of November; Financial Services, IT, FMCG stocks see inflows
“This has triggered short-covering, which has led to sharp intra-day volatility. The 500-point swing in Nifty from the peak to the trough yesterday indicates a tug-of-war between the bulls and the bears. The best strategy in this volatile context would be to remain invested with higher weightage for large caps, where there is valuation comfort,” added Dr. V K Vijayakumar.
Global Cues
Globally, geopolitical tensions continue to pose challenges, particularly the ongoing Russia-Ukraine conflict. According to Puneet Singhania of Master Trust Group, recent declines in the dollar index and US bond yields have created a more favourable environment for emerging markets like India.
On the economic front, significant macroeconomic releases—including US CPI inflation and unemployment figures—are expected to influence overall market sentiment. For the week ahead, these data releases will influence the market direction and also give some insights into the US Fed’s December meeting.
Oil Prices
Global crude oil prices fell by more than one per cent in the previous session to report a weekly loss after analysts projected a supply surplus next year on weak demand despite the Organisation of Petroleum Exporting Countries and its allies (OPEC+)’s recent decision to delay the oil output hikes until April 2025 and extend the deep production cuts to the end of 2026.
Brent crude futures settled at $71.12 a barrel, shedding 97 cents, or 1.4 per cent. US West Texas Intermediate (WTI) crude futures settled at $67.20 a barrel, falling $1.10, or 1.6 per cent. For the week, Brent prices lost more than 2.5 per cent, while WTI dropped 1.2 per cent. Back home, crude oil futures settled 1.4 per cent lower at ₹4,724 per barrel on the multi-commodity exchange (MCX).
Also Read: Morgan Stanley, HSBC slash crude oil supply forecast; Brent average pegged near $70 for 2025 after OPEC+ verdict
WTI and Brent have met resistance at their short-term moving averages, prompting algorithm-driven traders to enter the market and extend losses. Oil slid to the lowest in three weeks on Friday due to concerns about excess supplies and a wave of technical selling. US WTI futures declined 1.9 per cent to trade below $67 a barrel and touched their lowest intraday price since November 18.
Corporate Action
Shares of some companies will trade ex-dividend in the coming, while some will trade ex-bonus. Check full list here
Technical View
On the technical front, Nifty has shown impressive recovery over the past three weeks, retracing more than 50 per cent of its correction from the record high of 26,277.95 to the November 21 low of 23,263.15. The index has also reclaimed all key moving averages, establishing a support base of around 24,300. A decisive move above 24,800 could further accelerate the recovery, targeting the 25,100-25,300 zone.
Ajit Mishra of Religare Broking maintains a “buy on dips” strategy, emphasizing selective stock picking. While the IT and banking sectors continue to show sustained outperformance, selective contributions from other sectors are crucial to sustaining the current momentum. “While broader indices remain buoyant, it is important to focus on fundamentally strong stocks in the midcap and smallcap segments, as these counters are also prone to sharp decline during the corrective phase,” said Mishra.
Nifty 50 has reclaimed a bullish stance after five weeks of trading below the 21-week EMA, closing above it for the first time. According to Puneet Singhania of Master Trust Group, the strong support is at 24,250, which is aligned with the 21-day EMA, making it a key level for traders. Buying is favourable at around 24,500 with a stop loss at 24,250.
“On the upside, the index may aim to reclaim the psychological 25,000 level. However, if it breaches 24,250, further downside toward 23,900 is possible. The current trend indicates cautious optimism, with opportunities for buying on dips and clear risk levels for managing trades effectively,” he said.
Bank Nifty has established a strong base around the 49,800-50,000 range, followed by a breakout from consolidation. It closed the week robustly above the 21-week and daily EMAs, signalling a bullish undertone. The market favours buy-on-dips as long as it trades above 51,700.
“The immediate upside target is set at 54,200, which aligns with the ongoing positive momentum. However, a breach below 51,700 could trigger a correction toward the 51,000 mark. The overall trend for the Bank Nifty index appears sideways to bullish in the short term,” said Singhania.
Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. We strongly advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and individual circumstances may vary.