The Indian stock market displayed subdued performance on December 24, 2024, as investors responded cautiously to prevailing economic uncertainties and market volatility. Key indices Sensex and Nifty ended slightly lower amid mixed sector performances, raising concerns over potential declines amid significant foreign institutional investor (FII) outflows.
Nifty broke below its 200-day moving average (200-DMA) support level with substantial trading volumes, triggering warnings from market analysts. Kunal Shah, Senior Technical and Derivative Research Analyst at Mirae Asset Sharekhan, stated, "Nifty broke below the 200-DMA support with significant volumes, signaling potential decline to 23,300." On December 24, the Sensex fell by 67.30 points to close at 78,472.87, and the Nifty dropped 25.80 points to 23,727.65, reflecting broader market weakness.
The day’s trading session was characterized by volatility, with the indices fluctuated significantly. The advance-decline ratio showed 1:4 against the sellers. "Intraday recoveries face selling pressure, with no clear positive momentum. Consolidation is likely until a decisive breakout occurs," Shah added, confirming the prevailing bearish sentiment.
Concerns lingered over the performance of the rupee, which fell 9 paise to settle at a new record low of 85.20 against the US dollar, driven by rising US bond yields and persistent outflows from foreign markets. This drop continued to weigh on the market, as analysts expressed caution about the currency's stability. Foreign investors have sold equities worth Rs 15,828 crore over the past week, leading to heightened apprehension among traders.
The Lokpal also summoned SEBI head Madhabi Puri Buch and complainants, including TMC MP Mahua Moitra, for oral hearings related to allegations of corruption linked to a Hindenburg Research report, introducing additional layers of uncertainty to the regulatory environment. This scrutiny may weigh on investor sentiment as the integrity and operations of market regulators come under focus.
Despite the market's bearish trend, several initial public offerings (IPOs) received positive responses. The Citichem India IPO opened on December 27, ambitious to raise Rs 12.60 crore via 18 lakh shares priced at Rs 70 each. Analysts noted the significance of these IPOs as indicators of market health and investor appetite. The IPO activity continues to draw interest, with firm indications of substantial investor engagement noted across multiple offerings.
Highlighting sectors impacted by the market’s fluctuations, the metal sector demonstrated evident weakness, with several top Nifty gainers and losers prominently featuring companies within this industry.
Notably, market experts are projecting potential rebounds for select sectors, particularly within defense and pharmaceuticals, fueled by government initiatives and stable long-term demand. Sanjay H Parekh of Sohum Asset Managers opined, "We expect weak Q3 earnings but anticipate a stronger Q4, setting a positive base for next year." He views the current price correction as nearly complete and suggests potential for recovery as positive trends emerge.
Investors are especially focused on the burgeoning defense sector, poised for growth supported by increased government spending. Analysts highlighted Hindustan Aeronautics Limited (HAL) and Bharat Electronics Limited (BEL) as favorable investment picks, indicating optimism for substantial long-term gains. "India's defense sector is set for growth driven by increased spending and indigenization," industry analysts articulated, signaling potential benefits from rising domestic defense requirements.
Compounding the prevailing sentiment, many traders are keeping close tabs on daily performances of individual stocks. Some notable mentions included ITC, seen as solid within the FMCG sector, and Lupin, regarded positively within pharma. Vinay Rajani’s recommendations included, "Buy ITC at Rs 478 with a stop loss at Rs 465, target Rs 500", reinforcing the cautious optimism surrounding select equities.
On the macroeconomic front, pressures persist due to fluctuational external factors, namely the strong dollar which has been steering overseas investors toward profit-booking as they divest from Indian equities. Analysts have forewarned of continued challenges facing investors until the annual Q3 earnings season begins generating new insights for the forthcoming year.
With the Christmas holidays approaching and markets closed on December 25, traders are advised to exercise caution amid the current volatility, employing strict stop-loss measures to mitigate risk. The lack of clear direction indicates traders should remain vigilant, with the next major catalysts expected only upon the return of buying interest from FIIs post-holiday.
Overall, as market participants assess their strategies, the conditions highlight the pressures of external influences on domestic equities. The overall sentiment may be hovering on the brink of recovery as traders watch for the return of foreign investment and subsequent market supports necessary for reversing the bearish trends. Many analysts remain optimistic for 2025, anticipating gradual recovery contingent on stabilized economic conditions and the resolution of regulatory inquiries.
