Weekly Market Outlook: December 16-20 in India
The past week, from December 13, 2024, showed a positive trend with the Nifty and Sensex seeing increases of 0.37% and 0.76% respectively. Despite this, Foreign Portfolio Investors (FPIs) were cautious, being net sellers of $199 million in Indian equities, reversing their previous trend. Let’s take a look at how the different sectors performed during this time.
Out of the 20 key sectors analyzed, 11 sectors showed positive returns while 9 sectors exhibited negative returns. This mixed performance can be attributed to FPI activity and traders being cautious ahead of key data releases. The big losers of the week were PSU Banks, Energy, and FMCG sectors. The pressure on FMCG stocks is continuing due to consumption concerns, with 6 sectoral indices dropping by more than 1%.
On the brighter side, the IT sector was the best performer with a 2.86% gain, followed by Capital Markets at 2.36%. Consumer Durables and the digital index also showed gains of 1.7% and 1.46% respectively. Overall, 2 sectors gained more than 2% and 4 sectors saw increases over 1%.
The arithmetic average return for all 20 sectors was 0.08% for the week. The top 10 sectors delivered gains of 1.18% while the bottom 10 sectors gave a return of -1.02%. Tech-related stocks profited the most from the weak rupee exchange rate, contributing to the variation in performance.
During this period, the Nifty VIX remained relatively stable, fluctuating between 13 and 14. An essential takeaway is that the VIX needs to reach levels of 11.0-11.5 for a significant buy-on-dips rally.
Looking back at the previous week, there were key events that influenced market performance. CPI inflation for November 2024 reduced to 5.48%, largely in line with expectations. However, core inflation remained elevated at 3.7%. A new RBI governor, Sanjay Malhotra, replaced Shaktikanta Das, raising questions about future policy decisions. Additionally, industrial production in October improved to 3.45%, driven by the manufacturing sector.
FPI outflows during the week were moderate, with selling observed in consumer and energy stocks. The USDINR exchange rate fell further to ₹84.782/$, reflecting a weakening rupee. US inflation increased slightly to 2.7% year on year, raising concerns about the Fed’s December rate cuts.
Looking ahead to the week of December 20, 2024, market participants should keep an eye on key triggers. Corporate actions such as record dates for dividend and bonus issues, along with macroeconomic indicators like PMI manufacturing and WPI inflation, will offer insights into market direction. Policy announcements from the RBI and the Fed will also play a crucial role in shaping market sentiment. Stay informed and prepared for potential market movements in the coming week.
