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Informist, Tuesday, Dec. 17, 2024

By Anjana Therese Antony

MUMBAI – Analysts echoed that the weakness in the domestic market will extend for the third session Wednesday and may persist till the outcome of the Federal Open Market Committee's decision on US interest rates, due early Thursday. Investors also eye the policy outcome of the Bank of Japan and the Bank of England, both due Thursday. The weakness can be attributed to the uncertainty about future interest rates, depreciation of the rupee, and expensive valuations, among others, they said. While the near-term outlook on the market is slightly bearish, analysts are betting on a pickup in the government's capital expenditure, especially in Oct-Mar.

Finance Minister Nirmala Sitharaman said that the pace of government expenditure has picked up after the September quarter. The government's spending slowed down in the first half of the current financial year due to the Lok Sabha elections and delayed implementation of some Budget announcements, which also had a bearing on the country's economic growth in Jul-Sept, the minister said. Data showed that India's GDP growth during the September quarter saw a sharper-than-expected slowdown to a seven-quarter low of 5.4%. 

"Despite challenging 2024, faced with elections, FII outflows and high inflation with lower-than-expected growth, India is expected to be one of the fastest growing major economy in the world," ITI Mutual Fund said in its market outlook report for 2025. It also said that the government needs 52% on-year growth in its capital expenditure for it to meet the budgetary numbers and hence, it expects accelerated spending in Jan-Mar. 

On Tuesday, the Nifty 50 closed 1.4% lower at 24336 points and the BSE Sensex ended 1.3% down at 80684.45 points. The near-term support for the 50-stock index is pegged at 24300-24280 points and resistance at 24400-24490 points, a derivatives analyst at a domestic broking firm said. The rise in the fear gauge, India VIX, also hinted at the increasing nervousness in the market. The index closed 3.3% higher at 14.4850, up for the second consecutive session. 

The caution ahead of the US Fed's policy decision likely led to foreign investor outflows for the second consecutive session, analysts said. On Tuesday, FIIs net sold shares worth INR 64.10 billion. The depreciation in the rupee to a record closing low of 84.8950 after the November trade deficit hit a lifetime high of $37.84 billion triggered panic selling led by FIIs, analysts said. Analysts also said the trading volume may decline in the coming weeks owing to Christmas holidays and there will be lesser participation from FIIs, a trend seen during the month every year. 

With the Union Budget scheduled for February, investors will follow updates related to Union Budget allocations for various sectors and segments, analysts said. News daily Business Standard reported that the finance ministry is unlikely to roll out the new income tax bill in the upcoming budget session even though the internal review committee is likely to submit its report before the presentation of the budget. 

Among specific stocks, Ambuja Cements will be in focus as the company's board approved merger with Sanghi Industries and, separately, with Penna Cement Industries. The mergers, which are expected to be completed within 9 to 12 months, are still subject to approval from the National Company Law Tribunal, the company said. Shares of Ambuja Cements closed 1% lower at INR 571.10 on the National Stock Exchange. Aurobindo Pharma will also be eyed as the company got two observations from the US Food and Drug Administration for its subsidiary's Telangana unit. Its shares ended 2.5% lower at INR 1,213.75.  End

US$1 = INR 84.89

Edited by Akul Nishant Akhoury

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