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Informist, Friday, Jan. 3, 2025

By Anjana Therese Antony

MUMBAI – Analysts are divided on the direction the stock market will take next week after the breather on Friday from a two-day surge. While many are betting on an improvement in corporate earnings for the December quarter and the government's capital expenditure, a section remains cautious on account of expensive valuations, lack of clarity about the policies of US president-elect Donald Trump, and continuing foreign investor fund outflows.

The sceptical analysts say the government's spending trend is showing no sign of gaining momentum and the government may well miss by a wide margin its capital expenditure target for the financial year 2024-25 (Apr-Mar). However, they are optimistic about the country's growth prospects for the medium term to long term, supported by interest rate cuts by major global central banks, better liquidity in the system, and an improved demand scenario.

On Friday, the benchmark indices gave up half the gains they had made Thursday and closed lower. However, from a weekly perspective, the indices rose for the second consecutive week. The Nifty 50 ended 0.8% lower at 24004.75 points Friday and the BSE Sensex closed 0.9% lower at 79223.11 points. Though the Nifty 50 fell below the psychologically important level of 24000 during the day, it closed just above this mark. The near-term support for the 50-stock index is seen at 23980-23900 points and resistance is at 24100-24200 points, according to derivatives analysts at two broking firms.

Foreign institutional investors have been selling shares in the domestic market for at least three months now amid expensive valuations, disappointing earnings growth, earnings downgrades, a shift in focus to other markets such as the US and China, and rising geopolitical tensions in West Asia. As a result, returns from the Indian market in calendar 2024 halved from a year ago and were lower than the returns from other global markets.

Indian exporters are gaining more traction than their Chinese counterparts and exporting companies like Infosys will get more competitive as their income is dollar-denominated, Mark Mobius, chairman of Mobius Emerging Opportunities Fund, said in an interview with CNBC TV-18. Mobius is widely known as a pioneer in emerging market investing. He also said that doing business under Trump's administration would be easier as he expects the incoming US president to cut out a lot of the bureaucracy, paperwork, and impediments to doing business.

Domestically, the focus will now squarely be on the earnings season which begins next week. Views are also divided on how the results will turn out, with some analysts expecting an improvement during the December quarter, and others expecting to be disappointed.

Tata Consultancy Services will be the first large-cap player to release its results Thursday. The information technology giant's consolidated net profit is seen in the range of INR 121.80 billion-INR 127.30 billion, according to estimates from three broking firms. This would be higher than the INR 119.09 billion profit the company posted in the September quarter. Its revenue is seen in the range of INR 639.29 billion-INR 645.64 billion, against the INR 642.59 billion revenue it posted a quarter ago. Elara Securities India expects furloughs to hit the growth of TCS, but margins may improve by 40 basis points from the previous quarter.

Among other stocks. ITC will be in focus as Monday is the record date for the allotment of ITC Hotels shares as part of the demerger from the parent company. The stock closed 1.5% lower at INR 481.60 on the National Stock Exchange Friday.  End

Edited by Rajeev Pai

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