Sensex Closes at 81,709; RBI Holds Repo Rate at 6.5%
The Indian stock market opened with cautious optimism today as geopolitical tensions, recent monetary policy decisions by the Reserve Bank of India (RBI), and robust performance in the US markets influenced market sentiment. GIFT Nifty was trading slightly higher by 2 points at 24,726 levels, indicating a steady start.
Performance of Nifty and Sensex
In the previous trading session, benchmark indices ended their five-day winning streak, reacting to the RBI’s decision to maintain the repo rate at 6.5 percent. The Monetary Policy Committee, chaired by Governor Shaktikanta Das, revised the economic growth forecast for FY25 downward from 7.2 percent to 6.6 percent. Additionally, a reduction in the cash reserve ratio (CRR) was announced, aiming to ease liquidity conditions amid signs of slowing growth.
The Sensex closed 56.74 points lower at 81,709.12, a marginal dip of 0.07 percent. Meanwhile, the Nifty50 ended 30.60 points higher at 24,677.80, registering a 0.12 percent gain, reflecting mixed investor sentiment.
Domestic Cues and Developments
Sovereign Gold Bonds: Reports indicate that the finance ministry is contemplating halting the issuance of Sovereign Gold Bonds (SGBs) starting in FY26 as part of efforts to reduce government debt. This move could influence the dynamics of gold investments in the country.
Primary Market Activity:
Property Share Investment Trust is set to debut on the bourses today.
The IPO of Dhanlaxmi Crop Science (SME) opens for subscription, while Emerald Tyre Manufacturers (SME) is in its final day of subscription.
Nisus Finance Services Co IPO (SME) is expected to finalize its allotment, generating investor interest in the SME segment.
Institutional Investment Trends:
Foreign Institutional Investors (FIIs) sold shares worth ₹1,830.31 crore on December 6, reflecting caution amid global uncertainties.
Domestic Institutional Investors (DIIs) counteracted this trend, purchasing shares worth ₹1,659.06 crore, showcasing confidence in the domestic market.
Global Market Overview
Asia-Pacific
Markets in the Asia-Pacific region exhibited mixed performance:
Japan’s Nikkei gained 0.15 percent, driven by upward revisions in GDP growth for the third quarter, which expanded by 0.3 percent.
China’s inflation rate declined to 0.2 percent in November, the lowest since June, reflecting subdued economic activity and falling short of market expectations.
South Korea’s Kospi dropped 1.4 percent, and the Kosdaq fell 2.9 percent due to political uncertainties following President Yoon Suk Yeol’s survival of an impeachment vote.
Australia’s ASX 200 slipped 0.27 percent as concerns over global demand weighed on sentiment.
Geopolitical Developments
Political instability in France and South Korea, coupled with the reported collapse of the Syrian regime, has added to geopolitical tensions, further complicating the global economic outlook.
US Markets
The US markets closed with mixed results on Friday:
The S&P 500 edged up 0.25 percent to 6,090.27.
The Nasdaq Composite gained 0.81 percent, closing at 19,859.77, supported by strong performances from Tesla, Meta Platforms, and Amazon.
The Dow Jones Industrial Average dipped 0.28 percent, reflecting investor caution.
Better-than-expected jobs data for November bolstered hopes for a potential Federal Reserve rate cut later this month, supporting market optimism in some sectors.
Commodities Market Update
Gold:
Gold prices rose by 0.4 percent to $2,643 per ounce, fueled by ongoing geopolitical uncertainties. However, resistance at $2,666 capped further gains, reflecting cautious sentiment among investors.
Oil:
Oil markets saw slight gains, with Brent crude rising by 9 cents to $71.21 per barrel and US crude climbing 12 cents to $67.32 per barrel. Geopolitical tensions in the Middle East provided support, but concerns over weak demand, particularly from China, continue to weigh on prices.
Factors Influencing Market Sentiment
RBI Monetary Policy:
The decision to hold the repo rate steady at 6.5 percent reflects a cautious approach to balancing growth and inflation. The revision of the economic growth forecast has introduced a note of caution among investors, influencing market dynamics.
Institutional Investment Patterns:
FIIs continue to exhibit caution, likely due to global economic uncertainties and geopolitical tensions. However, the steady participation of DIIs highlights confidence in the resilience of the domestic economy.
Geopolitical Instability:
Ongoing political challenges in South Korea and France, along with developments in the Middle East, are contributing to a risk-off sentiment in global markets.
Global Economic Data:
Positive jobs data from the US and revised GDP figures in Japan have offered some relief, though mixed economic indicators from China continue to create uncertainty.
Sectoral Outlook
Banking and Financials:
Banking stocks are expected to remain in focus following the RBI’s decision to maintain monetary stability. Reduced CRR could provide liquidity support, benefiting financial institutions.
Technology:
Tech stocks are likely to see sustained interest, buoyed by strong performances in the US markets.
Energy:
The slight recovery in oil prices could impact energy stocks, with geopolitical factors continuing to play a significant role.
Consumer Goods:
Concerns over inflation and reduced economic growth forecasts may influence the consumer goods sector, though domestic demand remains a stabilizing factor.
Outlook for the Day
The Indian stock market is expected to navigate a mix of domestic and global factors today. Geopolitical tensions, the Reserve Bank of India’s policy decisions, and strong cues from US markets are likely to play pivotal roles in shaping market sentiment. Investors will closely monitor the performance of Nifty and Sensex, with cautious optimism amid prevailing uncertainties.
While challenges such as slowing growth and geopolitical instability persist, opportunities in specific sectors and continued support from domestic institutional investors provide a positive counterbalance, maintaining overall market stability.
