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Informist, Tuesday, Dec. 10, 2024

By Alina Geogy

MUMBAI – The benchmark indices are expected to be choppy again Wednesday due to lack of major domestic and global triggers, analysts said. Several analysts have recommended a 'buy-on-dips' approach for investors, as the indices are expected to remain in a thin range with limited downside. Market participants keenly await key inflation data from the US, due after market hours Wednesday, as it could shed light on the US Federal Reserve's much-awaited rate decision later this month.

On Tuesday, the Nifty 50 closed 8.95 points lower at 24610.05 points, while the Sensex ended 1.59 points higher at 81510.05 points. Support for the Nifty 50 is seen at 24580-24550 points and resistance is seen at 24700-24750 points, according to technical and derivatives analysts. Some consolidation is expected this week, before the index resumes its northward journey, analysts said.

Bullish momentum is anticipated in December, making it a good strategy to buy on every dip, Vinay Malasi, technical analyst at Khandwala Securities, said. Fall in selling by foreign institutional investors, which hit record levels over the past two months, has buoyed market sentiment. Analysts said they would not be too quick to rejoice about this trend, but would remain watchful of FII data over the coming days. Reasonable valuations in select pockets, after a healthy correction last month, are helping boost buying, analysts said. Expectations of a rate cut by the Fed later this month, which could be the third time after cuts in the last two policy meetings, could also help the indices rise, analysts said.

Investors have again been widely debating about the chances of a rate cut at the US Fed's December policy meeting. There is 86.1% probability that the Fed could cut rates by 25 basis points, according to data by CME FedWatch Tool. This expectation is higher than 72.9% just a week ago. The rate cut hopes were fuelled by a recent report that showed unemployment in the US rose in November. Now, the CPI reading would provide key input to understand the Fed's possible rate action, and analysts have warned that there could be some caution among investors ahead of this data, due after the market closes Wednesday. Investors also await producer price index data from the US for November, due late Thursday.

Ahead of US CPI data, market watchers will keep information technology stocks on the radar, as major domestic IT companies derive a significant portion of their revenue from the US. The earnings of Indian IT firms are expected to get a boost if the Fed ends up cutting key interest rates as that could ramp up pace of discretionary spending in the world's largest economy. Information technology was among the best performing sectors Tuesday, with shares of Infosys and HCL Technologies among the top gainers in the Nifty 50 index. The Nifty IT index, up 0.8%, was the second-best performer among sectoral indices.  End

Edited by Ashish Shirke

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