Market outlook for the next week (09-Dec to 13-Dec)

9 Dec 2024 , 05:35 PM

SECTORAL STORY IN THE WEEK TO DECEMBER 06, 2024

The week to December 06, 2024 saw Nifty and Sensex up by 2.27% and 2.39% respectively. During the week the FPIs infused an impressive $2,688 Million into Indian equities; marking the second consecutive week of net FPI inflows. Here is how the 20 key sectors performed in the week to December 06, 2024.

Sectoral Index	Weekly Returns	Index (22-Nov)	Index (15-Nov)
Nifty Capital Markets	8.70%	4,100.90	3,772.85
Nifty Realty	5.27%	1,073.90	1,020.15
Nifty Consumer Durables	5.01%	42,186.95	40,172.90
Nifty PSU Banks	5.01%	7,155.25	6,813.85
Nifty India Digital	4.23%	9,936.10	9,532.90
Nifty Non-Banks	4.11%	26,380.98	25,339.31
Nifty Metals	4.02%	9,397.15	9,034.00
Nifty IT	3.64%	44,716.05	43,146.25
Nifty Mobility	2.88%	20,591.49	20,015.55
Nifty India Defence	2.86%	6,898.70	6,706.75
Nifty Banks	2.79%	53,509.50	52,055.60
Nifty Automobiles	2.53%	23,960.25	23,368.55
Nifty Private Banks	2.48%	25,956.35	25,327.95
Nifty Infrastructure	2.28%	8,933.20	8,734.30
Nifty MNC	2.12%	29,462.25	28,852.00
Nifty Healthcare	2.09%	14,422.05	14,127.05
Nifty Oil & Gas	1.97%	11,322.60	11,103.75
Nifty CPSE	1.15%	6,600.95	6,526.15
Nifty Energy	0.96%	37,842.80	37,481.95
Nifty FMCG	-0.34%	57,744.30	57,943.70

Data Source: NSE

Here are key takeaways from the tabulation of weekly sectoral returns above.

• Out of the 20 sectoral indices, only 1 sector showed marginal losses while 19 sectors showed gains; which can be largely attributed to the FPI buying across the board. The sole loser in the week was the FMCG index, which was also just about marginally down by -0.34% on account of question marks over urban demand and margin pressures.
• Let us look at the sectors that gave the best returns during the week. Capital Markets ruled the week at 8.70% on the back of a sharp rally in BSE and CDSL. Realty, Consumer Durables, and PSU Banks gained over 5.0% for the week, while the Digital index, NBFC Index and the Metals Index rallied more than 4% for the week. A total of 16 out of the 20 sectors gained more than 2% in the week; hinting at a broad-based rally.
• For the week, the arithmetic average of returns of these 20 sectors stood at an impressive 3.19%. However, the top-10 sectors delivered 4.57%, while the bottom 10 sectors delivered 1.80%. The negative theme of the week, was limited to the FMCG sector; and even in this case the losses were just about 34 bps.

During the week, Nifty VIX remained in a tight range between 14 and 15. Markets will turn buy-on-dips, if VIX falls to 11.0-11.5 levels!
WEEK THAT WAS; THE GOOD, THE BAD AND THE UGLY

Here is a quick wrap of the week just gone by and how key events had a bearing on the stock market performance overall.

1. The monetary policy held the repo rates at 6.50%; which was expected considering that the inflation rate was at 6.21%. There is still the risk of monetary divergence as the Fed has cut rates by 75 bps since September 2024. However, in lieu of rate cut, the RBI did infuse additional liquidity by cutting the cash reserve ratio (CRR) by 50 bps to 4.0%. While the CRR cut releases ₹1.17 Trillion of liquidity it is still short of the potential liquidity gap of ₹3.75 Trillion. This raises the possibility of another 100 bps CRR cut.
2. RBI has upped its inflation estimate for FY25 and lowered its GDP growth estimate. In the light of the surge in food and core inflation, RBI has raised the FY25 inflation target by 30 bps to 4.8%. At the same time, the RBI has also cut the Q2FY25 GDP growth estimate by 60 bps from 7.2% to 6.6%. With the Q2FY25 GDP estimate coming in at 5.4%, and pressure on core sector and IIP, the growth cut was only expected.
3. FPIs infused $2.89 Billion during the week into Indian equities and also ended up net buyers in debt as FAR debt attracted a lot of FPI buying. The FPI buying was also on the back of expectations that the rupee had corrected substantially. Valuation concerns remain for FPIs, with respect to Indian equities.
4. The latest US unemployment rate for November 2024 may have just about opened the gates for the US to cut rates by another 25 bps on December 18, 2024; when the Fed meets for the last time in 2024. US unemployment ratio was up marginally from 4.1% to 4.2% for November; but lower than the peak level of 4.3%.
5. It is likely to be IPOs galore this week as 5 mainboard IPOs look to raise over ₹18,000 crore through a mix of fresh issue of shares and offer for sale (OFS). These 5 mainboard IPOs include Vishal Mega Mart, Indian Gemmological Institute, Sai Life Care, Inventurus Knowledge Solutions, and MobiKwik. There are also 6 SME IPOs slated for the week.
6. The subdued prices of crude oil are working in India’s favour. With Crude at $71/bbl, it is sharply down by nearly 20% from its recent peak. With the price of crude stabilizing, it has given stability to the USDINR also, although the longer term projections are that the rupee would weaken to ₹85/$ by early 2025 and to ₹86/$ by end of 2026.

The coming week will be a data heavy week with India inflation, US inflation and India IIP numbers to be released. The big focus now turns to the current account deficit for Q2FY25.

STOCK MARKET TRIGGERS FOR COMING WEEK TO DECEMBER 13, 2024

Here are some of the key triggers to keep a watch out for in the coming week to December 13, 2024.

• For the week, the Nifty was up +2.27% and Sensex ended +2.39% higher; as FPI buying supported the markets, despite weak GDP numbers. The weak oil prices also boosted the fortunes of mid and small cap stocks with the Mid-cap index up +4.10% and the small cap index up +4.51% for the week.
• The next results season will start in the first week of January. However, the major corporate action points for the week include Ceenik Exports (Dividend); Achyut Healthcare, Shradha Tech, Exxaro (Bonus / Split); and Qasar, Avonmore (Rights).
• CPI inflation will be closely watched on Thursday after spiking to 6.21% in October 2024. The IIP for October 2024 (reported with a 1-month time lag) is expected to be steady, although the real challenge is in handling the manufacturing growth, which showed signs of faltering in the Q2FY25 GDP numbers. The WPI inflation data will also provide good insights into the extent of impact on corporate profit margins.
• US consumer inflation is expected to be stable around 2.6% for November 2024. However, the real concern is that the core inflation continues to average around 2.8% while the headline inflation itself is about 60 bps away from the target. The last mile is going to be the big challenge for central banks across the world.
• USD held steady at around ₹84.70/$ as the heavy FPI inflows of $2.89 billion helped. However, there is an expectation that the rupee could weaken to ₹85/$ by early 2025 and further to ₹86/$ by end of 2025. Crude prices staying around $71/bbl will not only help rein the trade deficit, but also keep FPI flows robust into Indian equities.
• The coming week will see 5 IPOs collect more than ₹18,000 crore. These 5 IPOs on the mainboard are Visha Mega Mart (₹8,000 crore), International Gemmological Institute or IGI (₹4,225 cr), Sai Life Care (₹3,043 cr), Inventurus Knowledge Solutions (₹2,500 Crore), and MobiKwik (₹572 crore). This is over and above the 6 SME IPOs in the coming week.
• Finally, let us turn to the key global data points to influence the markets. For the US markets, the key data points include Non-farm productivity, EIA crude stocks, PPI, Initial Jobless claims, Trade prices, and wholesale inventories. For ROW, the key inputs are ECB rates, IIP (EU); GDP, Machine Tools Orders, PPI, IIP, capacity utilization (Japan); Inflation, PPI, Trade (China).

Let us finally turn to what all this means for the Nifty and the Sensex in the coming week to December 13, 2024.

PARTING THOUGHTS ON NIFTY AND SENSEX FOR NEXT WEEK

For the coming week, there are 3 things to keep an eye on.

• During the week, VIX was in a very tight range between 13 and 14; showing that volatility is finally stabilizing. That is still relatively high in absolute terms. Buy on dips works if the VIX drops to 11.0-11.5 levels. That is still a long way off.

• Nifty and Sensex have gotten close to crucial resistances. Nifty closed at 24,665 but needs to convincingly break above 24,700 to 24,800 for further upsides. Similarly, the Sensex, which closed the week at 81,700 levels has to decisively break above 82,000 to 82,500 range to be able to scale further highs. Next week will test if a genuine rally by the Nifty and Sensex is really possible.
• In the short term; the markets will be driven by data points like the US inflation, India CPI and IIP and the India trade data. However, a more longer term driver of the market will be the current account deficit (CAD) for the second quarter of FY25, which will be announced towards the end of December.

The undertone of the markets have changed for the better, but the risks are still fairly pronounced.