Markets likely to get cautious start on penultimate trading day of the year

Indian markets ended higher on Friday even as the rupee hit a new record low due to dollar demand from importers towards the end of the month and amid continued outflows from foreign investors (FIIs). Today, markets are likely to get cautious start on the penultimate trading day of the year. The holiday-thinned trading and weak global cues are likely to weigh on investors' mind in the absence of any major domestic cues. Foreign fund outflows likely to weight on sentiments. FIIs net sold Indian equities worth Rs 1,323.29 crore on December 27. Traders will be concerned as data released by the Reserve Bank of India (RBI) showed India’s foreign exchange reserves fell by $8.4 billion to $644 billion in the week ended December 20.  However, some support may come with report that following the lackluster growth numbers in the second quarter (Q2FY25), economists believe the upcoming Union Budget for 2025-26 should focus on reforms that will stimulate consumption, manufacturing and spur employment. Besides, a private report indicated that Indian economy is likely to grow at 6.5-6.8 per cent this fiscal and slightly higher between 6.7-7.3 per cent in FY2026. It added India continues to show resilience in certain pockets that are worth noting -- be it in consumption trends, services growth, the rising share of high-value manufacturing in exports, or the capital market. Moreover, India’s current account deficit (CAD) marginally narrowed to $11.2 billion or 1.2 per cent of GDP during the July-September quarter of financial year 2025 (Q2FY25) from $11.3 billion or 1.3 per cent of GDP a year ago, amid a rise in service exports. There will be some buzz in EV stocks as Vahan data from the Ministry of Road Transport and Highways (MoRTH) showed that India’s electric vehicle (EV) industry hit a new milestone in 2024, with sales surging 26.5 per cent year-on-year to 1.94 million units as of December 29. Banking stocks will be in focus as the latest Report on Trend and Progress of Banking in India 2023-24 released by the RBI showed that employee attrition in private sector banks has witnessed an increase to about 25 per cent and this high turnover rate poses significant operational risk. There will be some reaction in paint industry stocks as CareEdge Ratings in its study said the Indian paint industry, after witnessing robust growth in FY'22 and FY'23, is bracing for a challenging landscape marked by intensifying competition and margin pressures. Power stocks will be in limelight with report that India will set up more coal-fired and hydro-power plants and ramp up transmission infrastructure to achieve round-the-clock Power for All' in 2025, besides meeting rising demand fuelled by economic expansion. Meanwhile, Shares of Carraro India, Senores Pharmaceuticals and Ventive Hospitality will list on BSE and National Stock Exchange (NSE).

The US markets ended lower on Friday with no obvious trigger, though volumes were just two-thirds of the daily average. Asian markets are trading mixed on Monday as traders now await China’s manufacturing PMI data due on Tuesday. Economic data from South Korea showed industrial output contracting by 0.7 per cent in November compared to the previous month, exceeding the anticipated 0.4 per cent decline. 

Back home, Indian equity benchmarks trimmed some of their intraday gains but managed to close higher on Friday on the back of sustained buying by domestic institutional investors. After opening with a positive note, markets moved up further in the early part of the session as traders took encouragement with Finance Ministry in its monthly review stating that India's economy is set to grow at around 6.5 per cent in FY25. The Finance Minister further said that the growth outlook for October to December appears bright, with rural demand remaining resilient and urban demand picking up in the first two months of the quarter. Some optimism also came with report that India's market capitalisation has soared 18.4 per cent to $5.18 trillion in 2024, adding $806 billion. This growth ranked third globally among the top 15 major markets, both in percentage and absolute terms. India will finish the year with the fifth biggest global market. Sentiments remained firm in afternoon deals, as the commerce ministry in its 2024 year-end review stated that the Export Credit Guarantee Corporation of India (ECGC) is aiming to reduce the export credit gap through the Whole Turnover Export Credit Insurance for Banks (WT-ECIB) scheme, which is expected to benefit about 1,000 new small exporters, in addition to the existing 8,000-odd by facilitating the availability of adequate and affordable export finance from banks for working capital. However, markets trimmed some gains in late afternoon deals, as some concern came with the Global Trade Research Initiative (GTRI) stating that the depreciation of Indian rupee against the US dollar is expected to push the country's import bill by about $15 billion. Compared to December last year, the Indian Rupee (INR) has depreciated 2.34 per cent against the US dollar, moving from Rs 83.25 to Rs 85.20. However, strength in auto, Healthcare, and FMCG stocks kept the market in the green. Finally, the BSE Sensex rose 226.59 points or 0.29% to 78,699.07, and the CNX Nifty was up by 63.20 points or 0.27% to 23,813.40.