Market outlook for the week (23-Dec to 27-Dec)

23 Dec 2024 , 10:31 AM

SECTORAL STORY IN THE WEEK TO DECEMBER 20, 2024

The week to December 20, 2024 saw Nifty and Sensex down -4.77% and -4.98%. During the week, FPIs were net sellers of $114 Million in Indian equities; with lack of buying being the real issue. Here is how the 20 key sectors performed in the week.

Sectoral Index	Weekly Returns	Index (20-Dec)	Index (13-Dec)
Nifty Healthcare	0.37%	14,474.90	14,422.05
Nifty Capital Markets	-0.77%	4,069.15	4,100.90
Nifty Consumer Durables	-2.09%	41,304.65	42,186.95
Nifty IT	-2.11%	43,771.05	44,716.05
Nifty Realty	-2.30%	1,060.10	1,085.05
Nifty India Digital	-2.67%	9,671.15	9,936.10
Nifty FMCG	-3.71%	55,600.80	57,744.30
Nifty Non-Banks	-4.16%	25,282.35	26,380.98
Nifty MNC	-4.63%	28,098.10	29,462.25
Nifty Banks	-5.14%	50,759.20	53,509.50
Nifty Private Banks	-5.16%	24,617.60	25,956.35
Nifty India Defence	-5.24%	6,537.55	6,898.70
Nifty Infrastructure	-5.38%	8,452.40	8,933.20
Nifty Mobility	-5.65%	19,428.75	20,591.49
Nifty Automobiles	-5.76%	22,580.00	23,960.25
Nifty Metals	-6.21%	8,813.25	9,397.15
Nifty Oil & Gas	-6.31%	10,607.60	11,322.60
Nifty CPSE	-7.68%	6,093.75	6,600.95
Nifty Energy	-7.75%	34,910.60	37,842.80
Nifty PSU Banks	-8.10%	6,575.70	7,155.25

Data Source: NSE

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

• Out of the 20 sectoral indices, only 1 sector (Nifty Healthcare) gave positive returns with the other 19 giving negative returns. This can be attributed to heavy sell-off in the market after the record trade deficit and US Fed going slow on rate cuts in 2025.
• Out of the 19 sectors that fell during the week, the worst hit were PSU banks -8.10%, Energy -7.75%, CPSE -7.68%, Oil & Gas -6.31%, and Metals -6.21%. For the week, 13 sectors fell more than 4% and 11 sectors fell more than 5%.
• For the week, the arithmetic average of returns of these 20 sectors stood at -4.52%. While the top-10 sectors delivered -2.72%, the bottom 10 sectors delivered -6.32%. With 3 days of over 1,000 points in Sensex, the week was skewed towards sellers.

During the week, Nifty VIX spiked sharply and closed the week at 15.07. The high VIX was combined with a sharp correction, which is indicative of panic in markets.

WEEK THAT WAS; THE GOOD, THE BAD AND THE UGLY

Here is a quick wrap of how key events had a bearing on the stock market performance.

• The US Fed cut policy rates by another 25 bps, taking the total rate cuts to 100 bps in 2024. However, instead of 4 cuts, there will only be 2 cuts of 25 bps each in 2025.
• FPIs sold $114 Million of Indian equities in the week. For calendar year 2024, FPIs may end up almost neutral on equities, but decisively strong buyers in debt.
• RBI MPC minutes gave a clear indication that food inflation may not taper till the fourth quarter of FY25, virtually ruling out chance of a rate cut in the February 2025 policy.
• Brent Crude hovered in the range of $72/bbl to $73/bbl through the week. While oil has support at $70/bbl; any further upsides in oil are likely to be vary laboured.
• The US Bureau of Economic Analysis announced final Q3 GDP at 3.1%; 30 bps above the first two estimates. This almost rules out any chance of hard landing.
• PCE inflation for November 2024 edged higher to 2.4%, in line with consumer inflation, making a case for the Federal Reserve going slow on rate cuts in 2025.
• Merchandise trade deficit for November 2024 touched a record high of $37.84 Billion; as exports tapered and gold imports touched and all-time high level.

Let us now turn to big data flows in the coming week; both in the domestic and the global market.

STOCK MARKET TRIGGERS FOR COMING WEEK TO DECEMBER 27, 2024

Here are some of the key triggers to keep a watch out for in the coming week to December 27, 2024.

• Nifty down -4.77% and Sensex -4.98% down for the week. Mid-cap index -3.53% lower and small cap index -3.57% down. Rampant selling may continue next week.
• Key Corporate Actions Record Dates next week include Vedanta, Red Tape (Dividend); Dhanalakshmi Bank, Anupam Finserv (Rights), Mazagon Docks, Bharat Global (Split); KPI Green, NMDC, Hardwyn, Evans Electric (Bonus).
• RBI to announce CAD for Q2FY25 this week; expected at 1.6% of GDP in Q2FY25 but likely to further harden to 2.2% of GDP in Q3FY25.
• India forex reserves to be announced on 27-Dec. RBI Reserves fell from $715 billion to $652 billion and may put limits on RBI intervention.
• Truncated Christmas week may result in market short covering as Western markets shut down. That is evident in Dow Futures trajectory.
• Watch the yield spread for India 10-year bonds over the US 10-year bonds; which is already at 2-year low of 223 bps, and could trigger FPI selling.
• USDINR breaks ₹85/$ barrier to touch a low of ₹85.15/$. Dollar demand combined with Yuan weakness to keep the rupee under stress.
• Next week, 1 mainboard IPO (Unimech Aerospace) to open for subscription, 9 IPOs to close subscription and 5 IPOs to list on the stock exchanges.
• Key US market data points; Building permits, durable goods orders, new home sales, Atlanta Fed GDP, Crude Stocks, and Trade Deficit. Key ROW market data points: BOJ Policy Minutes, Core CPI, IIP (Japan); Current Account, GDP, Business Investments (UK).

Let us finally turn to what all this means for the Nifty and the Sensex in the coming week to December 27, 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 on a higher plane of 14 to 16; making the market fairly vulnerable to a sharp correction on any bounce from here.
• Nifty closed below 23,600 and must break above 24,250 for uptrend to resume. Sensex closed at 78,041 and must cross 80,000 for the uptrend to resume.
• With most major data points done and dusted, the focus shifts to the year-end short covering, 2025 FPI allocations and the current account deficit for Q2FY25.

The undertone of the markets changed for the worse this week; and it would take a big effort next week, with volumes, for the uptrend to resume.