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Informist, Monday, Dec. 2, 2024

By Anshul Choudhary 

MUMBAI – Benchmark indices are likely to stay in a range, but bias is likely to be positive as weaker-than-expected GDP growth in the September quarter has ignited hopes of some relief from the Reserve Bank of India. Despite the recent correction, analysts expect muted gains ahead, as there is still uncertainty around consumption and overall earnings growth in the second half of this financial year.

Analysts are largely convinced the second half of this financial year is likely to be much better than the first half, when earnings were affected due to disruptions due to the General Elections and heavy rainfall. Capital expenditure by the government is expected to drive recovery in Oct-Mar, analysts said. Expectations of higher spending by the government were further bolstered after the GDP growth in the September quarter came in sharply lower than expected at 5.4%.

"The quarter ending December is likely to benefit from a rise in government expenditure over the last few weeks," HSBC said in a report. "The March quarter, in turn, may benefit from stronger rural consumption... rural Indians seem to have used their earnings from the summer crop to build back savings."

While a recovery in rural growth is expected, the slowdown seen in urban demand in the September quarter has added to uncertainty, which will cap gains in markets. Analysts said they will wait for Oct-Dec earnings to ascertain if the slowdown in urban demand was temporary or will last longer.

Slower growth in the first half has led to analysts hoping for some relief from the RBI. "We believe some counter-cyclical policy support is inevitable; and do not rule out a rate cut in the December policy, while a rate cut by February 2025 is almost certain." Nirmal Bang Institutional Equities' Economist Teresa John said in a report.

While HSBC does not expect a cut in interest rates in the monetary policy meeting on Friday, they said the RBI may choose to announce some relief in terms of liquidity in the banking sector. "CRR (cash reserve ratio) rates could be eased by 50bp (50 basis points) in December, VRR (variable rate repo) transactions could be increased, and gradual OMO (open market operations) purchases could follow soon," HSBC said.

Technical analysts are not hopeful of sharp gains in benchmark indices and expect the Nifty 50 to face resistance at 24700 points this week. With the Nifty 50 already down nearly 8% from its lifetime high, analysts do not expect a big fall. The index may find support at 24000 points, just 1% below the current level. On Monday, the Nifty 50 rose 0.6% to close at 24276.05 points.

Cement companies may extend gains on Tuesday amid hopes of price hikes. Analysts said demand for cement will improve going forward, driven by higher capital expenditure by the government. Cement companies were among the top gainers on Monday with UltraTech Cement shares up 4%.  End

Edited by Saji George Titus

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