Banking, financial sectors drive Indian markets higher

Banking, financial and Telecom sectors drove an upward momentum in Indian equity benchmarks on Monday, with both Sensex and Nifty ending half a percent higher, with market participants awaiting Donald Trump’s inauguration as the 47th U.S. president. After a positive start, markets were volatile during early deals, amid report that the net foreign direct investment (FDI) in India dropped to $0.5 billion during April-November 2024 from $8.5 billion in the same period in 2023, reflecting the rise in repatriation and overseas investments by Indian firms. But soon, indices gained traction and held rally till the end. 

Some of the important factors for the markets:

RBI’s article lifted sentiments in markets: The RBI in its article on the ‘State of the Economy’ published in the January Bulletin has said that India’s economic growth is poised to rebound as domestic demand regains strength, though the stickiness in food inflation warrants careful monitoring.

Investors’ mood remained upbeat with a CII survey: The survey showed that India's current economic environment is conducive for private investments with the country emerging as a 'bright spot' amid the challenging global environment.

Optimism around India’s exports growth: Commerce Secretary Sunil Barthwal has said the government's target of $1 trillion export includes $250 billion from the engineering sector. The government has set a target to achieve $1 trillion export from India by 2030. 

Street overlooked Moody's report: It has lowered India's economic growth forecast to 7% for the fiscal year ending March 2025, down from 8.2% recorded in the previous fiscal year. This revision comes amidst a broader slowdown in global and domestic economic trends.

Global front: European markets were trading higher, after Switzerland's producer and import prices continued to decline in December, though at the slowest pace in fourteen months. Producer and import prices dropped 0.9 percent year-on-year in December, following a 1.5 percent decline in November. Asian markets ended in green, after the People's Bank of China maintained its interest rates for the third straight session as policymakers await the stance of new US administration. The PBoC left its one-year loan prime rate at 3.10 percent. 

Finally, the BSE Sensex gained 454.11 points or 0.59% to 77,073.44, and the CNX Nifty was up by 141.55 points or 0.61% to 23,344.75.    

The BSE Sensex touched high and low of 77,318.94 and 76,584.84 respectively. There were 17 stocks advancing against 13 stocks declining on the index.

The broader indices ended in green; the BSE Mid cap index rose by 0.66%, while Small cap index was up by 0.82%.

The top gaining sectoral indices on the BSE were Telecom up by 2.18%, Bankex up by 2.03%, PSU up by 1.53%, Power up by 1.39% and Utilities up by 1.17%, while Auto down by 0.50%, Consumer Disc down by 0.26% and FMCG down by 0.08% were the few losing indices on BSE.

The top gainers on the Sensex were Kotak Mahindra Bank up by 9.15%, Bajaj Finance up by 3.58%, Bajaj Finserv up by 3.18%, NTPC up by 2.96% and SBI up by 1.96%. On the flip side, Zomato down by 3.14%, Adani Ports & SEZ down by 1.23%, TCS down by 1.18%, Mahindra & Mahindra down by 1.05% and Maruti Suzuki down by 0.80% were the top losers.

Meanwhile, The International Monetary Fund (IMF) in its World Economic Outlook report has retained India's growth forecast at 6.5 per cent for fiscal 2026 and fiscal 2027. It said the global body noted a slowdown in the Gross domestic product (GDP) growth rate adding that ‘growth in India also slowed more than expected, led by a sharper-than-expected deceleration in industrial activity.’ 

India's economic growth slowed in the second quarter of the current fiscal as it expanded only by 5.4 per cent whereas in the second quarter the GDP growth rate was recorded at 6.7 per cent. The GDP growth rate in fiscal 2024 was recorded at 8.4. However, the economy still holds the tag of ‘world's fastest growing economy’.

The report stated that the strong US dollar and potential policy rate adjustments in the United States are pressuring emerging market currencies. On the international front, the IMF forecasted that global growth is projected at 3.3 percent in both 2025 and 2026, below the historical (2000-19) average of 3.7 percent. The forecast for 2025 is broadly unchanged from that in the October 2024 World Economic Outlook (WEO), primarily on account of an upward revision in the United States offsetting downward revisions in other major economies.

The CNX Nifty traded in a range of 23,170.65 and 23,391.10. There were 29 stocks advancing against 21 stocks declining on the index.

The top gainers on Nifty were Kotak Mahindra Bank up by 9.21%, Wipro up by 6.49%, Bajaj Finance up by 3.59%, Bajaj Finserv up by 3.25% and NTPC up by 3.04%. On the flip side, SBI Life Insurance down by 2.65%, Trent down by 2.04%, Shriram Finance down by 1.86%, HDFC Life Insurance down by 1.27% and Adani Ports & SEZ down by 1.27% were the top losers.

European markets were trading higher; UK’s FTSE 100 increased 25.92 points or 0.3% to 8,531.14, France’s CAC rose 18.98 points or 0.25% to 7,728.73 and Germany’s DAX gained 9.54 points or 0.05% to 20,912.93.

Asian markets settled mostly higher on Monday tracking Wall Street gains last Friday on optimism over the health of the US economy and Fed’s interest rate path. US industrial production increased by much more than expected in December while US single-family homebuilding rose to a 10-month high, separate reports showed. Although some gains were limited by investors’ cautious mood ahead of US President elect Donald Trump's inauguration later in the day, anticipating insights into his administration’s policies and potential signals on future interest rates. Japanese shares rallied, while the yen held near a one-month high amid expectations that the Bank of Japan might raise interest rates at its upcoming policy meeting. Moreover, government data showed Japan's core machinery orders rose 3.4% in November, exceeded expectations for a decline of 0.7% following the 2.1% increase in October. Chinese shares gained followed by news of the phone call between Xi Jinping and Donald Trump last week, spurring expectations that Sino-US relations will improve under the incoming US President. Meanwhile the PBoC maintained its one- and five-year Loan Prime Rates at 3.10% and 3.60%, respectively.