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Informist, Wednesday, Dec. 3, 2025

 

By Simran Rede

 

MUMBAI – The domestic equity market is poised to rise further in December with the Nifty 50 seen moving higher for the fourth month on the back of fundamental and technical factors. Though the 50-stock index has underperformed most of its global peers, analysts expect it to rise further in December with domestic triggers playing out well. They see the benchmark index notching fresh record highs in the month with critical support levels remaining intact. Market participants now await the monetary policy outcomes of the Reserve Bank of India, due Friday, and the US Federal Reserve, due next week.

 

The RBI was widely expected to cut the repo rate by 25 basis points to 5.25% at the end of the three-day meeting of its Monetary Policy Committee Friday. Retail inflation fell to a record low of 0.25% in October. However, surprisingly strong GDP growth in the September quarter has distorted the rate-cut view. India's economy expanded more than expected in Jul-Sept with GDP growth rising to a six-quarter high of 8.2%. The economy had grown higher-than-expected in the June quarter as well at 7.8%. GDP growth was 5.6% in the September quarter a year ago.

 

The GDP print has tempered hopes of a rate cut by the RBI even as uncertainty over the India-US trade talks persists. "The RBI's recent communication has turned noticeably softer, and while the space to cut is now openly acknowledged, the timing and forward communication remain contentious," Emkay Global Financial Services said in a report.

 

Meanwhile, the US Federal Open Market Committee is expected to reduce its key interest rate by 25 bps at its December meeting. US equities have benefited from renewed optimism about the outlook for interest rates following dovish comments by Fed officials. Markets have largely priced in a rate cut, with an over 87% chance of a 25-bp cut, according to the CME FedWatch tool.

 

Progress on the India-US trade deal would be another key cue for the market. In December, the two sides are likely to agree on the framework for the deal to address the reciprocal tariffs imposed by Washington, DC, on Indian exports to the US, Commerce Secretary Rajesh Agrawal had said Friday. Optimism among market participants over India signing a deal with the US to lower tariffs, which had climbed to 50% in August, has supported the case for the Nifty 50 rising in the near term.

 

VALUATIONS, EARNINGS

After the benchmark index hit an all-time high of 26325.80 points Monday, analysts expect it to face resistance at 26500 points, which is just 0.7% away from the record high and 2% higher than Wednesday's close of 25986 points. The resistance level is also just 100 points higher than the median resistance polled by Informist for November. "I cannot say that this is the best time to invest, but this is the best time to accumulate (in mutual funds) because market may not remain in this zone for long," Madhu Nair, chief executive officer at Union Asset Management Co., said. Earnings are slowly getting upgraded and FY26 is going to be much better than FY25, which is a good signal, he said Tuesday.

 

Though valuations are still frothy or expensive, there are several opportunities in the market where valuations are more comfortable, though not cheap, Nirav Karkera, head of research and fund manager at financial technology wealth management platform Fisdom, said. The Nifty 50 is trading at a price-to-earnings ratio of 20.6, one standard deviation above the long-term average, according to Emkay Global's India Strategy report.

 

From a valuation perspective, an uptick in corporate earnings will be crucial to improve the margin of safety, Karkera said. Though the impact of lower goods and services tax is likely to take time to percolate into corporate earnings, other government policy changes, easing of inflation, above-normal monsoon, and limited sensitivity to global macroeconomic disruptions are expected to boost earnings in the second half of the financial year 2025-26 (Apr-Mar), he said. 

 

In the September quarter, 47 companies in the Nifty 50 index reported a year-on-year rise of less than 1% in their cumulative net profit excluding exceptional items, missing analysts' expectation of a 5% rise. This was largely due to the disappointing performance of banks and Tata Motors Passenger Vehicles Ltd. The cumulative revenue of the 47 companies rose 8.7% on year during the quarter, higher than the expected rise of 7.3%.

 

The consumption story is seen picking up pace in Oct-Mar following a relatively robust festival season and limited monsoon-related disruption. The government's capital expenditure has been consistently on a strong footing. Though private capital expenditure is yet to pick up, it has started showing signs of improvement, Karkera said.

 

GLOBAL VIEW

So far this year, the Nifty 50 has risen 10%, sharply underperforming most global markets. Most of the rise has come in the two months since the GST rate cuts. The index has risen more than 6% over the past two months, better than the 5% return offered by the Nifty 50 in FY25, largely on the back of better-than-expected corporate earnings for the September quarter and growing optimism on a trade agreement with the US. The benchmark index has closed higher for the past three months.

 

Although the indices hit record highs in November, the poor returns from the market in more than a year are attributed to the continued outflow of foreign investor funds. Foreign portfolio investors net offloaded equities worth INR 37.65 billion in November against a net purchase of INR 146.10 billion in October, as per data from National Securities Depository Ltd. So far in December, FPIs have net sold INR 43.35 billion in Indian equities.

 

The aggressive selling by foreign investors has taken their investments in India close to their lowest level. "The selling was not entirely a reflection of a bearish sentiment but largely driven by a global risk-off (sentiment) in several pockets with weights towards emerging markets being moderated coupled with profit-taking in several pockets," Karkera of Fisdom said. He expects foreign flows to resume soon, once the global macroeconomic situation stabilises and Indian companies report stronger earnings.

 

Domestic institutional investors, meanwhile, have provided strong support with net purchases of equities worth INR 770 billion, according to a report by IDBI Capital Markets & Securities. "There is a clear structural shift in the way household savings are finding their way into financial assets and especially into capital market-linked assets," Karkera said. "With growing propensity to invest, migration of worth locked in physical assets shifting to financial assets coupled with increasing access and awareness to financial products, we expect retail and domestic participation to sustain." Domestic investors are expected to continue their strong support to the Indian equity market.

 

The depreciation of the rupee against the dollar to a record low has also triggered selling by foreign investors. The Indian unit settled at 89.46 a dollar in November, lower than the expectation of 88.75 a dollar, according to the median of estimates of 15 respondents from banks, corporations, and brokerages polled by Informist. Wednesday, the Indian currency ended at a new closing low of 90.19 a dollar, falling past the crucial support level of 90 per dollar. The rupee fell for the sixth straight session Wednesday. However, the depreciation bias for the Indian unit is expected to persist, given the uncertainty over the trade deal with the US. 

 

Despite global uncertainty, crude oil prices have continued to fall for the fifth month running. Brent crude oil prices, which had crossed the $80-per-barrel mark in June, have eased to less than $65 per barrel in November amid cooling geopolitical uncertainties and increased output by the Organization of the Petroleum Exporting Countries and allies.

 

Following are the support and resistance levels for the Nifty 50 index for December based on responses from 15 brokerages:

 

Broking Firm	Support 1	Support 2	Resistance 1	Resistance 2
Anand Rathi Shares and Stock Brokers	25700	--	26,700	--
Angel One	26000	25700	26500	26700
Choice International	26000	25800	26400	26650
Geojit Investments Ltd.	26030	25450	26460	26815
Globe Capital Market	25750	--	26500	26700
ICICI Securities	25800	--	26700	--
IDBI Capital Markets & Securities	26000	--	26500	--
Indiacharts	25850	25300	26300	27000
Lakshmishree Investment and Securities	25900	--	26300	--
LKP Securities	25980	--	26500	--
Nirmal Bang Institutional Equities	26000	--	26500	27000
NVS Brokerage	26245	26100	26700	--
Religare Broking	25600	--	27500	--
StoxBox	26100	26000	26320	26700
Chola Securities	26050	25900	26500	26800
Median	25850		26500

 

End

 

US$1 = INR 90.19

With inputs from Team Informist

 

Edited by Rajeev Pai

 

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