Markets likely to get cautious start tracking weakness in global peers

Indian markets closed flat in a volatile trade on Tuesday amid bouts of buying and selling in select heavyweight stocks. Today, markets are likely to get cautious start tracking weakness in global peers ahead of key US inflation data, which would give crucial clues about the Federal Reserve's policy decision at its meeting next week. There will be some cautiousness after oil prices rose slightly early on Wednesday, with market participants expecting to see demand rising in China next year after Beijing announced a looser monetary policy to stimulate economic growth. However, some support may come as S&P Global Ratings in its latest India Outlook said the Indian economy is set for resilient growth in 2025 on the back of strong urban consumption, steady services sector growth, and ongoing investment in infrastructure. The global ratings agency kept the FY25 gross domestic product (GDP) growth outlook unchanged at 6.8 per cent amid slower fiscal impulse tempering urban demand. The ratings agency said that higher labour force participation, infrastructure and technology improvement, and stronger public and household balance sheets can support economic growth in India. Meanwhile, Sebi has announced that the top 500 stocks will be eligible for the same-day settlement cycle (T+0) in a phased manner. The wider eligibility will become effective on January 31, 2025. There will be some buzz in insurance stocks as non-life insurers reported a tepid 4.4 per cent year-on-year (YoY) growth in premiums in November, owing to weak growth of standalone health insurers and the new premium reporting format effective from October 1, 2024. Besides, the new business premiums (NBP) of life insurance companies in November 2024 slipped by 4.5 per cent year-on-year (YoY) to Rs 25,306.56 crore, tracking a drop in the business of the giant - Life Insurance Corporation of India (LIC) - even as growth in premiums of private sector life insurance companies cushioned the fall. Banking stocks will be in focus after global rating agency Fitch said that rapid credit growth and historical risk-taking have intensified asset quality pressures in emerging markets like India and Vietnam. However, robust economic conditions and lower interest rates are expected to bolster near-term asset quality. There is anticipation of an improvement in non-performing loan (NPL) ratios in India and Vietnam, the rating agency said in a commentary on Asia-Pacific (APAC) banks’ risk appetite and asset quality. There will be some reaction in battery stocks as S&P Global Mobility said battery electric vehicles (BEVs) are projected to see nearly a threefold increase in production in calendar year (CY) 2025, driven by major electric car launches. This marks a rebound after muted demand in India in CY 2024. Auto stocks will be in limelight after Union Minister Nitin Gadkari exuded confidence that India's automobile industry will rise to the number one position globally in the next five years and outlined his ministry's ambitious target to also reduce the logistics costs in India to 9 per cent over two years.

The US markets ended lower on Tuesday ahead of key inflation data that could influence the Federal Reserve’s interest rate decision. Asian markets are trading mixed on Wednesday as investors await key policy meeting in China.

Back home, Indian equity benchmarks ended on a flat note in a highly volatile session on Tuesday as traders remained on sidelines ahead of this week's IIP and inflation numbers, which would be key given the RBI's reluctance to cut rates on the back of higher inflation concerns going ahead. After a flat to positive start, the market traded mostly in positive territory in the first half as traders took some support with private report stating that India retail inflation likely fell to 5.53% in November after breaching the central bank’s 6% upper tolerance band in October as the arrival of fresh produce to markets moderated soaring vegetable prices. Some support also came with the labour ministry stating that retail inflation for farm workers and rural labourers eased to 5.96 per cent and 6 per cent, respectively, in October from 6.36 per cent and 6.39 per cent in September. Besides, exchange data showed Foreign Institutional Investors (FIIs) were net buyers in the capital markets on Monday, as they purchased shares worth Rs 724.27 crore. However, profit booking in the second half dragged the markets into red. Traders turned cautious with reports that GST officers have detected cases of ITC evasion of Rs 35,132 crore by 17,818 fake firms between April-October and arrested 69 persons. But final-hour buying, especially in the IT and Realty stocks, helped indices to erase losses to end flat. Traders took a note of Union Minister of State Kirti Vardhan Singh’s statement that the Digital India initiative has laid the foundation for a developed India by 2047. He said over the past 11 years, the government has brought about a digital revolution, inspiring citizens to work digitally, which has had an unprecedented impact on 1.4 billion people. On the sectoral front, there was some buzz in entertainment and media industry related stocks as a private report said that India’s entertainment and media industry is projected to grow at a combined annual growth rate (CAGR) of 8.3 per cent to hit Rs 365,000 Crore (USD 19.2 billion) outpacing the global rate of 4.6 per cent. Stocks related to auto sector were in watch as Federation of Automobile Dealers Associations (FADA) stated that retail sales of vehicles across categories in India grew by 11.21 per cent at 32,08,719 units in November 2024, as compared to 28,85,317 units in the same month last year riding on two-wheeler demand. Finally, the BSE Sensex rose 1.59 points to 81,510.05, and the CNX Nifty was down by 8.95 points or 0.04% to 24,610.05.