Global trends, corporate earnings, and macroeconomic data continue to shape market sentiment
The Indian stock market experienced a challenging start to the week as benchmark indices BSE Sensex and Nifty 50 traded with significant losses on Monday. Mixed global cues and cautious investor sentiment contributed to the downward trend in major indices, reflecting broader concerns about the domestic and international economic landscape.
Benchmark Indices Under Pressure
At the time of writing, the BSE Sensex had declined by 536.87 points, or 0.68%, to settle at 78,686.24. The Nifty 50 followed suit, dropping 179.20 points, or 0.75%, to reach 23,825.55. Over half of the 30 stocks in the Sensex basket were trading lower, with notable losses recorded in sectors such as banking, metals, and oil & gas.
Among the Sensex gainers, Titan emerged as the top performer, rising by 1.74%, followed by Bajaj Finance, Bajaj Finserv, and Infosys. On the Nifty 50, Titan led the gainers with a 2.10% increase, alongside positive contributions from Mahindra & Mahindra and Bajaj Auto.
Sectoral Performance
Sectoral indices presented a mixed picture, with gains concentrated in IT and consumer durables, while banking and PSU sectors lagged. The Nifty IT index rose by 1.05%, driven by strong performances from key players in the technology sector. Similarly, the Nifty Consumer Durables index climbed 1%, buoyed by optimistic sentiment around domestic consumption trends.
On the downside, the PSU Bank index was the worst hit, falling by 1.5%. Weakness was also observed in indices such as Bank Nifty, FMCG, Media, and Metal, reflecting broader concerns around sectoral profitability and macroeconomic factors.
Broader Markets and Volatility
In the broader market, the Nifty Midcap 100 and Nifty Smallcap 100 indices registered declines of 0.10% and 0.29%, respectively. These movements underscored a cautious approach among investors, with risk-off sentiment weighing on smaller-cap stocks.
India’s volatility gauge, India VIX, rose by 5.28% to settle at 14.26, indicating heightened uncertainty and expectations of market fluctuations in the near term.
Institutional Activity
Foreign institutional investors (FIIs) continued their selling spree, with net outflows of ₹4,227.25 crore in Indian equities during the last trading session. This sustained selling by FIIs reflects their preference for US markets, which recently rebounded after a five-day losing streak. Domestic institutional investors (DIIs), however, showed resilience, recording net purchases worth ₹820.60 crore.
Key Economic Indicators
Crucial macroeconomic data, including India’s Services and Composite PMI readings for December, are expected to provide insights into the strength of domestic economic activity. These indicators will be closely watched by market participants for cues on future growth trends.
Additionally, the National Statistics Office is set to release the first advance estimates of GDP for FY25 on January 7. Analysts expect these figures to reflect moderate growth, supported by rural demand and robust agricultural and services output.
Global Market Trends
Asian markets displayed mixed movements, reflecting global investor caution amid key economic events. The MSCI Asia-Pacific Index, excluding Japan, edged up 0.1%, while Japan’s Nikkei 225 fell by 1.05%. South Korea’s Kospi gained 1.12%, and Hong Kong’s Hang Seng Index rose by 0.45%.
In the US, anticipation surrounding the December payrolls report and Federal Reserve minutes has led to tempered expectations around rate cuts. These developments, along with the release of inflation data in the EU and China later this week, are likely to shape global market sentiment.
Sector-Specific Insights
In the domestic market, the defense sector continues to attract investor attention due to increasing government focus on modernization and export growth. Analysts highlight the potential for long-term revenue expansion in defense stocks, which have become more attractive following recent price corrections.
The auto components sector faces challenges from a projected revenue slowdown of 6-8% for the current and upcoming fiscal years. This is attributed to softening global demand, prompting industry players to diversify their markets.
Meanwhile, capital goods and engineering firms are expected to maintain profitability in the December quarter, despite concerns over order book growth.
Primary Market Developments
In the primary market, activity remains robust with several IPOs scheduled for this week. Standard Glass Lining Technology and Indobell Insulation are among the mainline IPOs opening for subscription, while smaller IPOs, including Fabtech Technologies Cleanrooms, Davin Sons Retail, and Parmeshwar Metal, continue to attract investor interest.
Key Market Drivers
Earnings season is set to play a crucial role in shaping market movements, with several companies across sectors expected to release their quarterly results. The performance of IT, auto, and FMCG firms will be under particular scrutiny as investors look for signs of recovery and resilience.
The recent depreciation of the Indian rupee against the US dollar is another factor influencing market sentiment. While currency fluctuations may benefit exporters in sectors like IT, smaller pharmaceutical exporters face challenges due to potential price renegotiations.
Commodities and Currency
In the commodities market, gold remains steady at $2,641 per ounce, supported by strong dollar trends. Oil prices have risen slightly, with Brent crude trading at $76.70 per barrel and WTI crude at $74.23 per barrel. Cold weather across Europe and the US has contributed to this uptick.
In the currency market, the US dollar index remains strong at 108.950, reflecting continued investor confidence in the US economy. The Indian rupee’s depreciation against the dollar could impact trade balances and import costs.
Outlook for the Week
Investors are likely to remain cautious, balancing opportunities in earnings season with broader macroeconomic concerns. Key developments in global markets, particularly in the US and EU, will also influence sentiment in the Indian equity market.
As economic indicators and corporate earnings provide clearer direction, market participants will closely monitor sectoral trends and institutional activity to identify growth opportunities. With volatility on the rise, disciplined investment strategies and thorough research will be essential in navigating the week ahead.