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Informist, Monday, Dec. 23, 2024

By Alina Geogy

MUMBAI – Indian equities could see some more buying Tuesday, before investors head for a Christmas holiday Wednesday. Investor sentiment could be buoyed due to strengthened hopes that the US Federal Reserve could ease its monetary policy stance after lower-than-expected personal consumption expenditure data for November, analysts said.

However, potential gains could be capped due to expensive valuations and sale by foreign institutional investors last week, and the depreciation of the rupee, analysts said. The Indian rupee ended at a record closing low against the dollar Monday. The local unit has been clocking fresh record lows since last Monday. Worries over further deprecation in the rupee had led to FIIs selling shares in the domestic market last week, analysts said. FIIs net sold shares in all five sessions last week. Friday, these investors net sold shares worth nearly INR 36 billion, as per provisional data, taking the total sales last week to over INR 158 billion.

The personal consumption expenditures index, the US Fed's preferred inflation gauge, rose less than expected in November and rekindled hopes of loose monetary policy actions by the Fed next year. The PCE price index rose 2.4% on year in November, slightly lower than the estimate of 2.5%, according to a Reuters poll. Early Thursday, the Fed had reduced key interest rates by 25 basis points to 4.25-4.50%, but indicated that the pace of future rate cuts would be slower.

Going ahead, the Nifty 50 index will find a key support zone between 23650 points and 23550 points, while 23850-24000 points could serve as a key resistance area, according to analysts. The Nifty 50 is technically oversold considering the near 5% decline last week, analysts said. While the index is off to a good start for the week with a 0.7% gain Monday, last week's decline presents a favourable buying opportunity based on an improved risk-reward ratio, said Vikas Jain, head of research at Reliance Securities, said in a note.

Monday, the Nifty 50 closed at 23753.45 points, up 0.7%, and the BSE Sensex closed at 78540.17 points, up 0.6%. Both the indices snapped a five-day losing streak during which both had fallen nearly 5%. The India VIX, the fear gauge of the market, closed at 13.52, down 10% from the previous close of 15.07, indicating some decrease in market concerns.

However, "over the next few days, trading volumes are expected to be thin due to this being holiday-shortened week", said Vikram Kasat, head of advisory at PL Capital - Prabhudas Lilladher, in a note. With low trading volume expected in the upcoming sessions owing to the holiday season on account of Christmas and the calendar year nearing a close, the December quarter earnings would be the next big trigger for the market, analysts said. "Strong advance tax collections, showing over 20% growth, suggest robust Q3 (Oct-Dec) results expected next month", said Jain of Reliance Securities.

"Investors are now focusing on the Reserve Bank of India's forthcoming monetary policy and the Union Budget 2025, anticipating policy measures that could further support economic growth and market stability," said Kasat of Prabhudas Lilladher. Investors will also digest an announcement by the exchanges to conduct live trading sessions on Feb. 1, which is a Saturday, on account of the Union Budget. The normal market trading for the equity cash and equity derivatives segments will be conducted between 0915 IST and 1530 IST on both the exchanges.

Key data releases scheduled for the week include the US consumer confidence index for December, expected late Monday, and the weekly US unemployment insurance claims report, due Thursday.

Shares of Nifty 50-constituent Adani Enterprises will be on the radar after the company said, just sometime before the session closed, that its wholly-owned subsidiary Adani Defence Systems and Technologies would acquire an 85.8% stake in Air Works India (Engineering) at an enterprise value of INR 4 billion. The acquisition is expected to enhance Adani group's capabilities in the defence and civil aviation services sector. Shares of Kirloskar Brothers will also be in focus after the company's chief financial officer Ravish Mittal resigned.  End

Edited by Akul Nishant Akhoury

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