Indian equity benchmarks kicked off the final trading session of the week on a negative note, decisively quashing any lingering hopes for a traditional year-end Santa Rally. Both the Sensex and Nifty 50 opened lower on Friday, reflecting a cautious mood among investors as they look ahead to major domestic and global events in the new year.
Market Performance and Key Levels
The BSE Sensex opened 143 points lower at 72,953, while the Nifty 50 began the day at 22,032, down 42 points. This subdued opening followed a volatile Thursday session where the indices managed to close marginally higher after recovering from intraday lows. Market analysts are closely watching the Nifty's immediate support level of 21,900. A decisive break below this could signal further downside, while resistance is seen near the 22,150 mark.
Broader market indices mirrored the weakness, with the Nifty Midcap 100 and Nifty Smallcap 100 also trading in negative territory. Sectorally, the pressure was broad-based, though IT and metal stocks showed some resilience.
What's Dampening the Festive Spirit for Investors?
Several factors have converged to prevent the typical festive season uptick in stock prices. Persistent selling pressure from Foreign Institutional Investors (FIIs) has been a significant overhang. After being net buyers for several months, FIIs have turned net sellers in Indian equities in December, driven by rising US bond yields and a stronger dollar.
Domestically, elevated valuations are causing concern, making investors hesitant to commit fresh capital at current levels. The market is in a consolidation phase, digesting the sharp gains witnessed through much of 2023. Furthermore, there is a palpable sense of anticipation, with market participants preferring to wait for fresh triggers rather than driving prices higher in thin year-end trading.
Expert View: Budget and Trade Deals as 2025 Triggers
Market experts and analysts unanimously point towards two major catalysts for the Indian markets in the coming year: the Union Budget 2025 and potential global trade agreements.
V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted that the market is likely to remain range-bound in the near term. He emphasized that the focus has now shifted to the Union Budget, scheduled for presentation in February 2025. Investors will be keenly watching for policy directions, fiscal deficit targets, and sector-specific announcements that could provide a fresh impetus to the economy and corporate earnings.
Additionally, developments on the global trade front, including India's ongoing negotiations with key partners like the United Kingdom and the European Union, are seen as potential market-moving events. Positive outcomes from these deals could boost export-oriented sectors and improve foreign investor sentiment.
Prashant Tapse, Senior VP (Research) at Mehta Equities Ltd., suggested that while the short-term trend appears weak, the long-term bull market remains intact. He advised investors to use any significant dips as buying opportunities in quality stocks, particularly in sectors that may benefit from the government's continued focus on capital expenditure and manufacturing.
Looking Ahead: A Cautious Start to the New Year
The absence of a Santa Rally in 2023 sets the stage for a cautious start to 2024. The market's trajectory in the first quarter will heavily depend on global cues, particularly the US Federal Reserve's interest rate policy, and domestic factors like corporate earnings for the December quarter.
In the immediate future, trading volumes are expected to remain subdued due to the holiday season. However, activity is likely to pick up sharply in early January as institutional investors return with fresh allocations. The consensus on Dalal Street is clear: while the year-end may be quiet, all eyes are firmly set on the Union Budget 2025 and strategic trade developments as the primary engines for the next leg of the market rally.
