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Informist, Thursday, Dec. 5, 2024

By Alina Geogy

MUMBAI – Benchmark equity indices are seen rising again Friday, clocking gains for the third straight week. Investors will take cues from the outcome of the Reserve Bank of India's monetary policy meeting Friday. Though the RBI is widely expected to keep the repo rate unchanged, a minority of analysts expect a rate cut due to the sharp moderation in GDP growth in the Jul-Sept quarter. However, most analysts expect the RBI to inject liquidity into the banking system through a reduction in the cash reserve ratio, according to analysts.

The overall sentiment for the market remains positive, but there may be some volatility due to the policy announcement, Nandish Shah, senior derivative analyst at HDFC Securities, said. Shah is positive on banking stocks, as banks may benefit from the highly-anticipated liquidity boost due to a reduction in the cash reserve ratio. Banking stocks have been rising for at least three sessions, on growing expectations of a cut in CRR.

The Monetary Policy Committee is expected to maintain the repo rate but implement a 50 basis point CRR cut or announce open market operations to infuse liquidity into the system, brokerage firm Prabhudas Lilladher said. This would signal the RBI's focus on addressing near-term financial stability while maintaining flexibility for future rate adjustments, according to the brokerage.

On Thursday, the Nifty 50 and Sensex closed 1% higher each at 24708.40 points and 81765.86 points, respectively. The key indices reversed intraday losses and witnessed volatility in the last half an hour of trade. The support for the Nifty 50 is pegged at 24100 points, and resistance is at 24800 points, according to Dharmesh Shah, vice president and head of technical at ICICI Securities.

Information technology stocks are also expected to extend gains Friday. There is a positive sentiment towards the sector now because of expectations of yet another rate cut by the US Federal Reserve at its next meeting later this month and hopes that earnings may improve over the next few quarters, analysts said.

The Fed has already cut rates at its last two monetary policy meetings, with a rate cut of 50 bps in September and 25 bps in November. Now investors are expecting one more cut in December, particularly after Fed Chair Jerome Powell said the US economy was in a better shape compared to when the Fed began cutting interest rates in September. This has raised the probability of a 25-basis-point cut later this month to 74%, from 66.5% a week ago, on the CME FedWatch tool. Shares of IT firms such as Infosys and Tata Consultancy Services closed over 2% higher each Thursday following Powell's comments and were the top gainers in the Nifty 50 index.

Investor sentiment is also expected to be boosted by the recent buying by foreign institutional investors. FIIs have been buying for the past two days and this may help the indices sustain the current gains if the trend continues, Vanitha Poojari, equity research analyst at Maximus Securities, said. Investors will also await the US unemployment insurance weekly claims report due later in the day and the US November employment report expected Friday evening.

Shares of Gujarat Gas will be in focus as Gujarat State Petroleum Corp., the Gujarat government-owned company that is slated to merge with Gujarat Gas by August 2025, is learnt to be in the final stages of reaching an agreement with TotalEnergies of France to source 60 liquefied natural gas cargoes over 10 years, Informist reported. At current LNG prices of around $15 per million British thermal units, the total deal could be worth $2.7 billion to $2.9 billion, as per the report.  End

Edited by Saji George Titus

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