Market Rally Takes Breather as Global Uncertainties Loom
India's equity benchmarks are poised for a largely unchanged opening on Tuesday, following six consecutive sessions of impressive gains. Investors have turned cautious as they await crucial economic data from the United States that could provide clarity on whether the Federal Reserve might implement rate cuts next month.
The Gift Nifty futures were trading at 25,990.5 points as of 7:46 a.m. IST, suggesting that the Nifty 50 could open near Monday's closing level of 26,013.45 points. This indicates a potential flat opening for Indian markets after their recent bullish run.
Six-Session Rally Driven by Multiple Positive Factors
Both the Nifty and Sensex have delivered remarkable performances over the past six trading sessions, with each index climbing approximately 2%. This sustained upward movement was supported by several key factors including a steady earnings season that delivered no major disappointments, robust domestic inflows, and the resolution of the U.S. government shutdown that had previously created global uncertainty.
The consistent performance has brought both indexes within striking distance of their record highs, currently sitting about 1% below the peaks they reached in September 2024. Market analysts maintain that overall sentiment remains positive, but caution that markets might experience a consolidation phase in the near term due to global uncertainties and diminishing expectations for an immediate U.S. rate cut.
Global Markets and Domestic Investor Activity
Overnight, Wall Street equities closed lower, while Asian markets experienced declines of up to 1%, reflecting the cautious global sentiment. The focus this week remains squarely on the lineup of U.S. economic data, which includes the delayed September jobs report that investors will scrutinize following the end of the government shutdown last week.
According to CME FedWatch, the probability of a 25-basis-point rate cut by the Federal Reserve on December 10 has dropped significantly to 42.9% from 62.4% just last week. Investors are closely monitoring whether the data released this week could revive hopes for an imminent rate cut, especially as several central bank policymakers continue to make hawkish comments that have dampened rate-cut expectations.
The significance of U.S. rate decisions cannot be overstated for emerging markets like India, as higher U.S. rates typically make investments in emerging economies less attractive for overseas investors seeking better returns in dollar-denominated assets.
Domestic Institutions Continue Buying Spree
On the domestic front, institutional investors maintained their strong support for Indian equities. Domestic institutional investors remained net buyers of Indian shares for the 14th consecutive session on Monday, injecting 14.66 billion rupees into the market.
In a positive development, foreign institutional investors snapped their five-session selling streak, purchasing 4.42 billion rupees worth of stocks, according to provisional data from the National Stock Exchange (NSE). This shift in foreign investor behavior could signal changing sentiment toward Indian markets.
Stocks to Watch
• Mphasis: Blackstone is set to reduce its stake in the IT company through a large block deal. Reports from CNBC-TV18 indicate the private equity firm will sell up to 9.5% stake at a discount of 4.4% over Monday's closing price.
• Paytm: Elevation Capital plans to sell Paytm shares worth 16.4 billion rupees, representing approximately 2% stake through a block deal. The floor price is set at a discount of 3.9% to Monday's close.
• AstraZeneca Pharma: The company has signed an agreement with Sun Pharma to distribute and market Sodium Zirconium Cyclosilicate in India, a drug used to treat hyperkalaemia.
• PTC Industries: The company announced expansion plans for its Gujarat facility, adding over 50,000 square feet of shop floor area to boost manufacturing capacity.
Market participants will continue to monitor global developments and domestic investor behavior as Indian equities navigate through this period of consolidation after their recent strong performance.
