The benchmark indices of the Indian stock market, the Sensex and Nifty 50, are anticipated to begin Monday's trading session on a flat note. This cautious stance mirrors the muted sentiment in global equity markets as investors navigate a complex web of international relations and central bank decisions.
Global Headwinds and Domestic Tailwinds
Asian markets adopted a watchful approach at the start of the week. Investors are weighing deteriorating relations between China and Japan, a packed schedule of central bank policy meetings worldwide, and the overall risk appetite as the new year approaches. The MSCI's index of Asian shares dipped by 0.1%, aligning with a decline in US stock futures. Australia's market saw losses, and Japan's Nikkei 225 fell by 0.4%.
Back home, domestic sentiment received a significant boost last week following supportive actions from the Reserve Bank of India (RBI). The central bank delivered a 25-basis-point rate cut and proposed a substantial ₹1.45 lakh crore liquidity infusion through bond purchases and dollar-rupee swaps. This proactive move propelled the indices to close Friday with solid gains.
The Sensex surged 447 points, or 0.52%, to settle at 85,712.37. Similarly, the Nifty 50 climbed 153 points, or 0.59%, to finish at 26,186.45. However, the broader market showed divergence; the BSE Midcap index inched up 0.21%, while the Smallcap index declined by 0.67%.
Key Market Triggers for the Week Ahead
The trajectory of Indian equities this week will be influenced by a confluence of domestic and international factors. The Gift Nifty was trading around the 26,326 level, indicating a flat-to-negative start for the Indian indices.
Vinod Nair, Head of Research at Geojit Investments Limited, noted, "Overall, the short-term outlook remains cautiously positive, with a focus on strong corporate earnings in December. However, near-term risks such as a widening current account deficit and global trade tensions continue to pose challenges. The stance of the US Fed on rate cuts will be crucial for maintaining the domestic trend for the month."
Major triggers include:
- Central Bank Decisions: The US Federal Reserve's policy meeting outcome is the most critical global event. While a rate cut is widely expected, the commentary will be key.
- Economic Data: India's Consumer Price Index (CPI) inflation data will be closely monitored for cues on domestic price pressures.
- Geopolitical & Trade Developments: Progress on the India-US trade deal talks, with US Under Secretary Allison Hooker's ongoing visit, and the aftermath of the India-Russia summit where a $100 billion bilateral trade target was set, will be in focus.
- Commodity Movements: Movements in crude oil prices and gold (which spiked to $4,259 an ounce on Friday) will impact related sectors.
- Foreign Fund Flows: The behavior of Foreign Institutional Investors (FIIs) will be crucial for market direction.
Global Market Snapshot and Corporate Action
On Wall Street, the S&P 500 rose 0.2% on Friday, coming within 0.3% of its all-time high. The Dow Jones and Nasdaq Composite also gained 0.2% and 0.3%, respectively. In a major corporate development, Warner Bros Discovery shares jumped 6.3% after Netflix agreed to a $72 billion acquisition of its studios and streaming division.
In economic data, US consumer spending rose 0.3% in September. The Fed's preferred inflation gauge, the Personal Consumption Expenditures Price Index, increased 2.8% year-on-year, marking the largest rise since April 2024. The US dollar held steady as traders awaited central bank cues.
With inputs from Reuters, the market's direction this week hinges on navigating these multiple triggers, balancing domestic optimism from the RBI against global uncertainties and policy shifts.
