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Informist, Wednesday, Dec. 4, 2024

By Anjana Therese Antony

MUMBAI – The anticipation that the Reserve Bank of India would adopt measures to boost the liquidity in the banking system is likely to keep providing comfort to equity investors in India, who have burnt their fingers for almost two months till November. While the recent correction has brought valuations to a better level, experts believe that stocks are still expensive. "Valuation has not come down to a comfortable level in most parts of the market, barring select pockets of private sector banks or a few names in insurance," said George Thomas, fund manager – equity at Quantum Asset Management Co. Of course, compared from two months ago, things are better, but valuations have not come to a cheap zone and return expectations have to be moderate, Thomas said. 

The RBI, which is scheduled to announce its interest rate decision on Friday, is expected to retain repo rate unchanged for the 11th consecutive time at 6.50% and is expected to reduce the cash reserve ratio from the current 4.5%. The hope of higher liquidity has pushed banks and financial services stock sharply higher for two sessions now and may continue to see upside in the near term. All indices related to the financial space, such as Nifty Private Bank, Nifty Bank, Nifty Financial Services, and Nifty PSU Bank closed higher by 0.9-2.3%. 

Gains in the financial space helped the benchmark indices to close slightly in the green after swinging between gains and losses during the day. The Nifty 50 closed 10 points higher at 24467.45 points and the BSE Sensex ended 0.1% higher at 80956.33 points. Both indices closed in the green for the fourth consecutive session. Near-term support for the 50-stock index is seen at 24420-24380 points and resistance at 24530-24600 points, a technical and derivatives analyst at a domestic broking firm said.

Another sign of relief for investors is the easing of foreign outflows. While the worst has bottomed out with respect to outflows, analysts said India does not have enough fundamental factors at present to attract massive inflows. "We need to see how earnings growth and private as well as government capex cycle will turn out," a research analyst at a domestic broking firm said. Though these parameters are expected to improve during Oct-Mar, what happens in other countries, such as the US after Donald Trump comes back to power and the stimulus measures in China, will also affect foreign flows to India, the analyst said. 

Among the sectors that analysts bet on is cement, which is expected to see price hikes and rise in volumes in the months to come. Cement stocks had fallen sharply in the previous months, particularly on poor earnings performance and volumes. However, a pickup in the government's capital expenditure cycle and price hikes are expected to make things better for cement players, analysts said. On Tuesday, Informist had exclusively reported that cement companies across the country are considering a price hike of INR 30-INR 50 per 50-kg bag. 

On the global front, investors will look at the updates in South Korea, where political uncertainty took shape as President Yoon Suk Yeol faced impeachments after he declared martial law, which was later called off. Investors will also look at the no-confidence motion against the French Prime Minister Michel Barnier after he used special constitutional powers to pass a contested budget bill without a parliamentary vote.

Insurance companies may continue to be in focus amid the expectation that the government may reduce the goods and service tax on premiums. HDFC Life Insurance Co. was the top gainer in the Nifty 50, closing 2.6% higher at INR 650.25. The recently-listed Niva Bupa Health Insurance Co. hit its 20% upper band at INR 98.31.  End

Edited by Akul Nishant Akhoury

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