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Informist, Wednesday, Dec. 11, 2024

By Anjana Therese Antony

MUMBAI – The US inflation data, due later Wednesday, is expected to lend cues to a market which has been moving in a tight range for at least four sessions now, analysts said. The inflation data will be a major trigger for a market, a senior research analyst at a bank-sponsored broking firm said. Any sharp rise in inflation could keep the US Federal Reserve from cutting interest rates further, which would be against the market's expectations, the analyst said.

Indices have been moving in a tight range after they surged to a one-month high on Dec. 5 after the US Federal Reserve said the US economy is in a "remarkably good shape", which fuelled hopes of a reduction in interest rates this month. The Nifty 50 Wednesday closed 31.75 points or 0.1% higher at 24641.80 points and the BSE Sensex closed just 16 points higher at 81526.14 points. The near-term support for the 50-stock index is pegged at 24500-24480 points and resistance at 24680–24730 points, according to two technical and derivatives analysts. The weekly expiry of options contracts Thursday is likely to result in some volatility during the final hour of trading, these analysts said.

The US inflation data gains importance due to Fed Chair Jerome Powell's comments earlier that the apex bank is not in a hurry to cut rates further as it needs to bring inflation to its target of 2%. The US CPI is expected to have accelerated to 2.7% in November from 2.6% in October, while the core annual CPI is forecast at an unchanged pace of 3.3%, according to a poll of economists by The Wall Street Journal.

Indian information technology companies, which have high exposure to the US, are likely to be in focus. On Wednesday, the Nifty IT index was among the top sectoral gainers. It closed 0.3% higher. The rate cut hopes have turned some focus to IT companies, which had felt the heat of high interest rates in the US, sharp reduction in discretionary spending by US-based clients, muted demand, and order wins for more than a year.

India's inflation data, due at 1600 IST Thursday, will also be in focus. According to a poll of 14 economists by Informist, the CPI inflation likely moderated to 5.6% in November from a 14-month high of 6.21% in October. The CPI data follows a sharper-than-expected fall in GDP to a seven-quarter low of 5.4% in Jul-Sept against expectations of 6.5%.

Expensive stock valuations are likely to keep gains under check in the coming months, except certain pockets like private banks and insurance. "Several investors are of the view that regulatory tightening by the RBI has made the banking sector difficult to invest in beyond a handful of good quality names," Nomura Global Markets Research said in its report. Any easing of the current draft regulations will be looked at positively for the sector's loan growth and profitability outlook, but whether this plays out or not remains to be seen, the broking firm said. Banks were among the biggest laggards on Wednesday, with losses in Axis Bank and State Bank of India weighing the most on the Nifty 50.

The focus is shifting to defence, railway, and construction-related companies on hopes of a pickup in the government's capital expenditure cycle. Many analysts are optimistic that government spending will gain traction during Oct-Mar and these companies will get more orders.  End

Edited by Ashish Shirke

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