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Informist, Tuesday, Dec. 3, 2024

By Anjana Therese Antony

MUMBAI – With foreign fund investors easing on selling domestic equities recently, analysts said the near- to medium-term outlook on Indian equities looks bullish. They also said that valuations have reached comparatively reasonable levels, especially after the correction in October and November. "Government spending would be accelerated in the second half (Oct-Mar), that would contribute to the upside," Vinit Bolinjkar, head of research at Ventura Securities, said.

"I think the negativity around the market is now less...There is a good upside of another 1000 points for the Nifty 50 over the next month," Bolinjkar said. Tuesday, the Nifty 50 closed 0.8% higher at 24457.15 points and the Sensex ended 0.7% higher at 80845.75 points. The near-term support for the 50-stock index is seen at 24300-24280 points and resistance at 24530-24620 points, a technical and derivatives analyst at a domestic broking firm said.

Benchmark indices have declined close to 10% each in the last two months. "The Nifty (50) does give a pullback of 8-12% almost every year and it turns out to be a buying opportunity in hindsight," broking firm Sharekhan said in its research report. However, the risk-reward is still not favourable in certain pockets of small-cap and micro-cap stocks, it said. 

The recent correction in the stock market has cooled off valuations in large-caps, even as mid- and small-caps trade at expensive multiples, Motilal Oswal Financial Services said in its research report. The broking firm has an 'overweight' view on sectors such as information technology, healthcare, consumer discretionary, industrials, and real estate. It has 'underweight' view on metals, energy, and automobiles.

The sharper-than-expected slowdown in India's Jul-Sept GDP growth is likely to push the Reserve Bank of India to adopt measures to improve the liquidity in the banking system. However, analysts do not expect the central bank to cut interest rates as inflation remains above the 4% target. "We believe that the RBI will sound more dovish on the monetary policy outlook for February, and we bring forward our rate cut forecast to the February policy review from April," Morgan Stanley said in its report.

The RBI is expected to retain the policy repo rate at 6.50% for the 11th consecutive time on Friday. In October, the headline inflation rate had surged to a 14-month high of 6.2%. Hope of improvement in liquidity in the banking system is likely to drive banking stocks in the coming sessions. Tuesday, banks and financial services stocks led the gains in the market and contributed to nearly 0.3% rise in the Nifty 50. Indices related to the financial space, such as Nifty Private Bank, Nifty Financial Services, Nifty Bank, and Nifty PSU Bank, closed 0.9-2.6% higher.

Analysts are also hopeful that Oct-Mar will be better than Apr-Sept for the domestic market. This would be primarily driven by better government spending, improved liquidity, and better growth in corporate earnings growth. Among major bets are cement companies, where growth would be driven by volumes and price hikes, analysts said. Some companies are planning to hike cement prices, including UltraTech Cement, ACC, Ambuja Cements, India Cements, and Orient Cement, Informist reported Tuesday, attributing dealers and sources. Cement companies across the country are considering a price hike of INR 30-INR 50 per 50-kg bag and a decision on this will be taken Tuesday, multiple sources said.

Among specific stocks, Rail Vikas Nigam will be in focus as the company said it got a letter of acceptance for a rail contract worth INR 1.87 billion. The stock closed 0.2% higher at INR 437.75 on the National Stock Exchange on Tuesday. 

On the global front, investors will closely watch US October job openings and labour turnover survey due Tuesday at 2030 IST. With respect to domestic economic data, investors await the HSBC India Services and Composite PMI for November, due Wednesday at 1030 IST.  End

Edited by Ashish Shirke

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