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Informist, Tuesday, Jan. 7, 2025

By Anshul Choudhary

MUMBAI – The benchmark indices are likely to move in a range Wednesday amid caution ahead of the December quarter earnings. Further, the continuous outflows by foreign investors are expected to limit any gains and may even push markets down, analysts said.

"India earnings growth expectations remains muted with ongoing challenges such as slowing macroeconomic environment, weak earnings cycle, limited room for further valuation expansion, and the possibility of continued selling by FPIs (foreign portfolio investors)," IDBI Capital Markets & Securities said in a report. Due to these concerns, the brokerage expects the market to remain range-bound with a "lot of volatility".

A slowdown in earnings growth is a major worry at a time when stock valuations are still high, analysts said. Nuvama Institutional Equities said the slowdown in earnings would mean further downgrades. The brokerage said earnings of Nifty 50 companies are likely to grow a mere 2% in Oct-Dec, lower than the 4% rise seen in the first half of this financial year.

"The more worrying aspect is that a slowdown in earnings is now being led by demand rather than external/liquidity shock," the brokerage said. "Hence, reversing the same shall need a significant policy response, which at present is not on the anvil."

The continuous selling by foreign investors has also affected market sentiment. Foreign institutional investors net sold equities worth INR 25.75 billion Monday. With that, FIIs net sold equities worth INR 72 billion so far this month till Monday. Analysts are not hopeful this will change anytime soon as earnings growth is yet to pick up and the 10-year bond yield in the US remains above 4.5%. High yields in developed markets such as the US make investing in emerging markets less attractive for foreign investors.

Due to concerns around earnings slowdown and outflows, the Nifty 50 is expected to face resistance at higher levels. "The bias is sideways to negative unless Nifty (Nifty 50) crosses 24200 points," Kapil Shah, technical analyst at Emkay Global Financial Services, said. He expects the Nifty 50 to find support around 23500 points, while there are other analysts who said the Nifty 50 may fall to 23250-23200 levels in the coming sessions. On Tuesday, the Nifty 50 closed at 23707.90 points, up 0.4%.  End

Edited by Rajeev Pai

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