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Informist, Friday, Dec. 27, 2024

By Anjana Therese Antony

MUMBAI – Though there was some easing of near-term nervousness in the domestic market, analysts do not see a major rise in the absence of major cues as valuations remain expensive. Some analysts also expect the slowdown in earnings growth of domestic companies to continue in the December quarter. If so, gains would be limited in the coming months compared to how they were in the last couple of years. Adding to the worry would be the continuous fall in the value of the rupee, which is now at a record closing low of 85.53 a dollar.

On Friday, the Nifty 50 and the BSE Sensex each closed 0.3% higher at 23813.40 points and 78699.07 points, respectively. The near-term support for the 50-stock index is pegged at 23650-23500 points and resistance at 23950-24100 points, according to two derivatives analysts. The fear gauge, India VIX, closed 5.7% lower at 13.2375, hinting at the easing of near-term nervousness in the market. 

The expensive valuations of the Indian equity market have been weighing for at least two years now, but analysts said the country's growth prospects are strong enough to lead to higher returns in the medium-to-long term. Both the benchmark indices have gained around 10% so far this year, which is half the upside they saw in 2023. While the first half of the year saw a stellar performance from the domestic market, the second half saw major corrections and foreign investor outflows due to unfavourable factors, including the geopolitical tension in West Asia, the likely boost to the US economy next year under president-elect Donald Trump, anticipation of slower rate cuts by major global central banks, and slowdown in earnings growth.

Analysts and fund managers are expecting the government's capital expenditure cycle to gain traction, which could give a push to many sectors, thus leading to better financial performance. However, there are conflicting views among analysts about this. The government is likely to miss its budgeted target for capital expenditure as its spending in the first half was slower, primarily due to the general election, the Budget, and the monsoon, Pravin Bokade, head of equity research at IDBI Capital Markets & Securities, told Informist in an interview.

Meanwhile, data show that India's current account deficit widened to $11.16 billion during the September quarter, equivalent to 1.2% of the country's GDP. The increase in the deficit was due to an increase in the merchandise trade deficit, as per data released by the Reserve Bank of India Friday. 

With respect to economic data, investors await a series of metrics next week, including the government's GST collections for December, due Wednesday, and the HSBC India Manufacturing Purchasing Managers' Index for December, due Thursday.  End

Edited by Rajeev Pai

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