The market continued its upward trend for the second week in a row, ending on January 3. However, it could not hold onto all its gains as participants employed a sell-on-rally strategy influenced by factors such as a strong US dollar, high valuations, ongoing foreign institutional investor (FII) outflows, a weakening Indian rupee, and increasing oil prices.
Nevertheless, buying activity in sectors like auto, FMCG, pharmaceuticals, and oil & gas, along with inflows from domestic institutional investors (DIIs), helped support the market.
"Looking ahead to the second week of the year, several key events are likely to influence market sentiment. The earnings season begins with IT major TCS, a key trigger as any signs of improvement in Q3 numbers could reverse the ongoing trend of FII outflows. Additionally, a host of economic data, including HSBC Composite PMI, HSBC Services PMI, Fiscal Year GDP Growth, and IIP, will be closely monitored for further cues," said Ajit Mishra - SVP, Research, Religare Broking Ltd.
The stock market began 2025 on a strong note, with key indices rising by nearly 1% despite some fluctuations. Initially, market sentiment was somewhat muted but improved in the following sessions.
The significant upward trend was particularly evident on Thursday, allowing the indices to finish the week positively, even though the final session was relatively uneventful.
Consequently, the Nifty and Sensex concluded the week at 24,004.7 and 79,223.11, respectively.
In the upcoming week beginning January 6, market sentiment is expected to stay optimistic despite potential volatility. Attention will be on the December quarter earnings season, various data releases from the US, and the minutes from the FOMC meeting. Additionally, the start of earnings season is likely to boost activity in individual stocks.
The earning season is all set to begin next week by Tata Consultancy Services (January 9) and Avenue Supermarts (January 11).
Overall, the September 2024 quarter numbers were subdued, which was one of key reasons caused selling pressure in the market, hence the market participants will focus on sequential numbers.
Among other companies, Tata Elxsi, Indian Renewable Energy Development Agency, One Mobikwik Systems, CESC, GM Breweries, Transformers and Rectifiers (India), GTPL Hathway, Yash Highvoltage, GNA Axles, PCBL and Valecha Engineering will also release quarterly earnings in the coming week.
Investors will keep an eye on the minutes of the December FOMC meeting, during which the central bank reduced the interest rate by 25 basis points, bringing the total rate cuts in 2024 to 100 basis points. However, the Fed signaled a cautious outlook for 2025, indicating the likelihood of only two rate cuts instead of the four previously anticipated, while emphasizing the importance of Trump-era policy announcements and inflation data.
Additionally, various U.S. economic indicators, including the unemployment rate, non-farm payrolls, JOLTs job openings and quits, ADP employment changes, Challenger job cuts, vehicle sales, and factory orders, will be closely monitored. These data points will provide market participants with valuable insights into the interest rate trajectory for 2025.
The initial public offering (IPO) market is poised to commence 2025 on a robust note, with seven new issues scheduled for next week. In addition to these upcoming IPOs, the market will also witness six listings from companies whose IPOs either concluded last week or are set to close in the coming week.
As of now, approximately 100 companies have submitted their draft offer letters to the market regulator SEBI, with some having received approval while others are still pending clearance.
Foreign Portfolio Investors (FPIs) began 2025 on a cautious note in Indian equities, registering a net sell-off of ₹4,285 crore during the first three trading sessions of the year, as reported by the National Securities Depository Limited.
Notably, the most significant selling occurred on January 1, 2025, with a net outflow of ₹5,351 crore, marking the largest single-day sell-off by foreign investors in the equity market this year.
In contrast, December saw FPIs making a positive net investment of ₹15,446 crore in Indian equities, indicating a shift in sentiment as they started the new year.
"The general perception that the market has turned weak due to sustained FII selling during the last three months is largely true. However, what is not generally appreciated is that even while selling in the cash market through exchanges, FIIs have been buyers through the primary market. They have been big investors through the QIP route.
FIIs are likely to continue to sell going forward, so long as the dollar continues to rally and the U.S. bonds yield attractive returns. The dollar index at around 109 and the 10-year bond yield above 4.5% are strong headwinds for FII flows," said V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services.
Investors globally are anticipated to monitor the December Services PMI data from various developed and developing countries. Key indicators include inflation and Producer Price Index (PPI) figures from China, as well as unemployment rates, PPI, and retail sales from the Eurozone. Additionally, household spending statistics from Japan will also be of interest to market participants.
The recent actions have caused a rebound in oil prices, which had fluctuated within a $5 range for several months. As of now, Brent Crude Futures, the global oil standard, closed at $76.51 per barrel, marking the highest price since mid-October and reflecting a 3.7% increase over the past week.
This rise is fueled by expectations of a stimulus package from China aimed at enhancing economic growth, along with anticipated interest rate cuts from the U.S. in 2025.
“Crude oil prices rose to around $73.2 per barrel, boosted by optimism about China's economic prospects following President Xi Jinping's pledge to promote growth in the world's largest oil-importing country. A continued decline in US crude inventories provided additional support. However, the year's overall outlook remains uncertain, with expectations of oversupply and a potential revival of idled OPEC+ production. Traders are also paying close attention to geopolitical developments, such as the potential impact of Donald Trump's return to the White House. We expect crude oil prices to remain volatile in today’s session. Crude oil is having support at $72.10-71.50 and resistance is at $73.50-74.10 today’s session,” said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.
The record date for ITC's demerger with its hotel business has been set as January 6. Meanwhile, January 8, Wednesday will serve as both the ex-date and record date for Kamdhenu's stock split. Additionally, it will also be the ex-date and record date for the rights issue of Camlin Fine Sciences.
A significant bullish candle was formed on the weekly chart, characterized by both upper and lower shadows, indicating a high wave candle pattern. The Nifty's near-term uptrend remains strong, and a decisive breakout above Thursday's peak of 24,226 could lead to increased buying interest, targeting levels between 24,400 and 24,500. Immediate support is identified around the 23,930 to 23,840 range, according to Nagaraj Shetti from HDFC Securities.
In terms of open interest (OI), the highest call OI was noted at strike prices of 24,200 and 24,100, while the put side showed the highest OI at the 24,000 strike price, followed by 23,900.
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, consider individual risk tolerance, and conduct thorough research before making investment decisions, as market conditions can change rapidly, and individual circumstances may vary.
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