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Informist, Friday, Dec. 26, 2025

By Arya S. Biju

MUMBAI – Benchmark equity indices are expected to consolidate further next week, amid lack of triggers and reduced trading activity towards year-end. Further, the cautious mood ahead of the upcoming earnings season, uncertainty over the long-awaited India-US trade deal and continued outflow of foreign funds from domestic equities are expected to keep the market sentiment under pressure. 

The optimism around the Santa Claus rally, which typically sees a rise in stock prices in the last five trading days of December and the first two trading days of January, has diminished amid the absence of fresh catalysts, such as progress on the India-US trade deal, said Vinod Nair, head of research at Geojit Investments, in a note. Both countries are in ongoing trade talks to finalise a bilateral trade agreement, with a focus on lowering the 50% tariff on exports to the US from India. Earlier, market participants had expected the India-US trade deal to be signed by November. Chief Economic Adviser V. Anantha Nageswaran earlier this month had said that India and the US are likely to secure a trade deal by March.

So far this week, foreign portfolio investors continued to be net sellers of Indian stocks after having been net buyers for the three sessions before Monday. On Wednesday, they net sold shares worth INR 17.21 billion. So far this year, foreign investors have sold domestic equities worth over INR 1.58 trillion on a net basis. Domestic investors, on other hand, remained net buyers of Indian equities, acting as a counterbalance and providing stability to the market. On Wednesday, domestic investors bought stocks worth INR 23.81 billion. 

The rupee ended a tad lower against the dollar Friday, after moving in a thin range amid lower volumes. Over this week, the domestic currency depreciated by INR 20 paise against the dollar, on steady dollar demand from corporates and in the non-deliverable forwards market. This follows the slight recovery in the rupee against the dollar seen last week on likely intervention by the Reserve Bank of India.   

"The currency (rupee) remained volatile through the week in a 89.60–89.90 (per dollar) band. Rising bullion and non-agricultural commodity prices have added pressure on the rupee due to higher import costs. Next week, cues will come from commodity trends, FII (foreign institutional investor) activity and the (US) Fed's (Federal Open Market Committee) meeting minutes, with the rupee seen in a 89.45–90.25 (a dollar) range," said Jateen Trivedi, vice president research analyst of commodity and currency at LKP Securities, in a note. 

Spot prices of precious metals such as gold and silver continued their sharp rally, tracking futures prices on Multi Commodity Exchange of India and COMEX. Bullion prices had hit fresh record highs Friday on the MCX and COMEX on weak dollar and demand for safe-haven assets amid rising geopolitical uncertainities. Growing expectations of a rate cut by the US Federal Reserve in 2026 also supported the metal. 

Crude oil prices also remained higher, as the US imposed heightened economic pressure on Venezuelan oil exports and carried out airstrikes against Islamic State fighters in northwest Nigeria at the request of the Nigerian government, according to a Reuters report. Both Venezuela and Nigeria are major oil producers. At 1805 IST, the Brent Crude Oil Futures were largely flat at $62.25 per barrel. 

On the earnings front, Elara Securities expects banking and financial services companies to see better loan growth, improved net interest margins, lower slippage in unsecured and microfinance institutions in the December quarter. However, it remains cautious about deposit trends, with weaker flow at the industry level and high incremental credit-deposit ratios. "Even with better Q3 outlook, we expect certain pressure points on deposits and anticipate NIM revisions (for FY27), which could lead to earnings revision (not to mention, further rate cuts, if any, would impact further)," the brokerage said in a report Friday.  

While it expects resilient earnings for most major private banks, it sees softer earnings for a few private and mid-sized banks,  Elara Securities said. Meanwhile, it expects the December quarter to be steady for public-sector banks. For the December quarter, Elara prefers ICICI Bank, Kotak Mahindra Bank and State Bank of India among larger banks and Karur Vysya Bank and AU Small Finance Bank among mid-sized banks. 

Friday, the benchmark equity indices closed lower, extending losses from Wednesday's session. The headline indices moved in a thin range Friday amid muted trading activity towards the year-end. The Nifty 50 settled at 26042.30, down 99.80 points or 0.4%. The BSE Sensex closed at 85041.45, down 367.25 points or 0.4%. However, both the indices closed higher for the week, up 0.3% and 0.1%, respectively.

"As we step into a crucial week that marks both the close of the calendar year and the beginning of a new one, we expect consolidation to persist unless a decisive breakout emerges from the current range," said Rajesh Bhosale, equity technical analyst at Angel One said in a note. Technical analysts see the 26000 point mark as a key catalyst in deciding the direction of Nifty 50 next week. While a fresh sell-off is expected if the Nifty 50 falls below the 26000-point mark, some analysts expect the index to retrace to 26,200 points and higher if the 50-stock index holds the 26000-point mark "decisively."

Next week, technical analysts expect the 50-stock index to find support at 26000–25900 points and immediate resistance is placed at 26150–26250 levels. Investors will focus on industrial production data, manufacturing PMI, and the US FOMC minutes.   End

Edited by Akul Nishant Akhoury

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