Mumbai, December 22
The participants in the Indian market will be keenly monitoring foreign institutional investment (FII) flow trends, global market performance, and initial public offering activities in the domestic markets for direction, stated market analysts.
According to the analysts, the market will also react to the decisions made in the 55th GST Council meeting on December 21. Sectors such as insurance, auto, luxury goods, and food deliveries are likely to influence the market trends and respective sector's performance.
"Looking ahead, the coming week is shortened due to holidays, and participants will closely monitor FII flow trends and global market performance for direction. Additionally, the scheduled expiry of December's derivative contracts may amplify volatility," stated Ajit Mishra, SVP, Research, Religare Broking Ltd.
Anticipating the market's movement for next week, Manish Goel, Founder and MD, Equentis Wealth Advisory Services Limited, stated that the market participants will have an eye on the activities in the IPO activities in the upcoming week, starting Monday.
"Next week will be busy for the IPO market, with several companies going public. While this is expected to generate short-term momentum, any underperforming IPOs could create volatility. The surge in listings may divert investor capital from key stocks, affecting liquidity and overall market sentiment," Goel stated.
Goel stated that the US Fed's decision to reduce interest rates by 25 bps but indication of a slower pace of further cuts could limit foreign investor enthusiasm in the Indian markets.
The markets faced significant pressure this week, losing nearly 5 percent and wiping out the gains of the past four weeks.
After a subdued start, both Nifty and Sensex benchmarks continued to decline daily, closing near the week's lows at 23,857.5 and 78,041.59, respectively.
After starting the week on a strong buying spree, foreign portfolio investors (FPIs) turned net sellers in the Indian equity market and the net investment turned negative this week with Rs 977 crore, according to data from the National Securities Depository Limited (NSDL).
The widened trade deficit for November has also dampened the domestic sentiment. India's merchandise trade deficit for November stood at USD 37.84 billion, driven by a surge in imports relative to exports. This is reportedly the highest monthly trade deficit on record.
Reflecting the broader sentiment, all key sectors except pharma ended lower, with metals, energy, and banking taking the hardest hits. The broader indices also succumbed to pressure in the final sessions, shedding over 3.5 percent each.
The sharp sell-off in heavyweight sectors like banking and IT, which had previously supported the market, has shifted the bias back to bearish.
Weakness in the rupee, along with a relatively stronger US market performance driving outflows, is compounding the current challenges.
Among sectoral indices, pharma and healthcare appear resilient, while IT is approaching a critical support zone.
Energy has entered an extremely oversold territory, which could trigger a short-term bounce. In the banking index, significant support lies at the long-term moving average around 50,400 and further at the November low of 49,787.10.
Conversely, auto, PSE, and metal sectors may continue to underperform in the near term. Traders are advised to adjust their positions accordingly, keeping a strong emphasis on risk management.