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Informist, Friday, Dec. 13, 2024

By Anjana Therese Antony

MUMBAI – In the absence of major triggers, Indian equities are likely to see muted gains in the first three sessions next week, after which the outcome of the US Federal Open Market Committee's policy meeting will determine the direction of the domestic market, analysts at two different broking firms said.

"Though a further cut (in interest rates) is expected, the Fed's (US Federal Reserve's) comments on outlook are more important," a research analyst at a domestic broking firm said. "In the past, he (Fed Chair Jerome Powell) had refrained from giving such comments, which made investors wary of the bank's next move."

According to the CME FedWatch tool, there is a 96.7% possibility that the Fed will cut interest rates by 25 basis points next week. The apex bank surprised global investors in September with a 50-bps reduction in interest rates, which was followed by a cut of 25 bps in November. The in-line US inflation data for November also firmed up hopes of a trim in rates next week.

The Fed's decision may turn the focus on Indian information technology companies which earn most of their revenue from the US. Hopes of another rate cut in the world's largest economy have boosted optimism about the IT sector since November, making these stocks among the outliers last month when the overall market fell, particularly after Donald Trump won the presidential election. On Friday, the Nifty IT index closed 0.6% higher, up for the fifth straight session.

Among other global central banks scheduled to announce their monetary policy decisions are the Bank of England and the Bank of Japan, both due Thursday. The minutes of the Reserve Bank of India's latest meeting earlier this month will be released Dec. 20.

In India, expensive valuations have been a worry for investors, which was one of the major reasons for foreign fund outflows for almost two months till November. Experts said almost all sectors are expensive, except for a few private banks and insurance companies. Analysts and fund managers are betting on a pickup in the government's capital expenditure cycle, which is expected to gain traction over Oct-Mar. Though the quantum of selling by foreign investors in the domestic market has eased significantly compared to the previous two months, experts do not see major inflows in the coming months. They said valuations need to ease further and earnings growth should improve to attract foreign investors back to the Indian markets.

The benchmark indices closed higher for the fourth consecutive week Friday after having fallen for two successive weeks. The Nifty 50 closed 0.9% higher at 24768.30 points and the BSE Sensex ended 1% higher at 82133.12 points. Both indices fell around 1.5% during the session from the previous close, but recovered and rose around 2.5% from the day's lows. Near-term support for the Nifty 50 is pegged at 24600-24500 points and resistance at 24800-24870 points, a technical and derivatives analyst at a domestic broking firm said.

Hopes of increased government capital spending are expected to boost cement, defence, and other construction-related companies. The impact of price hikes by cement companies is expected to kick in and experts believe the demand scenario will improve during Oct-Mar. "We are structurally positive on the industry. We prefer players with a balanced geographic mix, higher capacity utilisation, and a strong track record of capacity expansion and successful integration," Motial Oswal Financial Services said in its report.

Shares of hotel companies are likely to rise further next week, but not sharply, on the positive outlook for the sector. In terms of quarterly growth, the hospitality sector continued to mark its ascendancy, registering positive growth in revenue per available room of 2% sequentially in Oct-Dec, IDBI Capital Markets & Securities said in its report this week. The industry's strong momentum and sustained domestic demand for business travel as well as corporate and social meetings, incentives, conferences, and exhibitions will drive a busy season, the broking firm said. Indian Hotels Co. closed over 2% higher, up for the second consecutive week.

Subscription for the initial public offering of Inventurus Knowledge Solutions will close Monday. The issue was subscribed 1.36 times on the first day, with the company receiving bids for 14.09 million shares against 10.37 million shares on offer.  End

Edited by Rajeev Pai

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