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The Indian stock market, represented by the Sensex and Nifty indices, exhibited a range-bound trading pattern for the third consecutive session on December 11th. This cautious market sentiment was largely attributed to investor anticipation surrounding the upcoming release of crucial inflation data. Specifically, investors were keenly awaiting the United States' Consumer Price Index (CPI) report, scheduled for later that day, and India's CPI print, expected on December 12th. These data points are considered pivotal in shaping expectations for future interest rate adjustments by both the US Federal Reserve and the Reserve Bank of India. The prevailing uncertainty regarding future monetary policy actions contributed significantly to the subdued trading activity and the lack of decisive directional movement in the indices.
While the overall market remained relatively stagnant, certain sectors displayed notable performance discrepancies. The auto and metal sectors emerged as outperformers, registering significant gains. The Nifty Auto index experienced a rise of half a percent, fueled by strong performances from prominent players such as Mahindra & Mahindra (M&M), Maruti Suzuki, and Hero MotoCorp. This positive performance in the auto sector was partially attributed to Jefferies' designation of M&M as a top pick within the sector, thereby boosting investor confidence and driving up demand for its shares. Simultaneously, the Nifty Metal index saw a 0.4 percent increase, primarily driven by gains in Vedanta and Tata Steel. This upward movement in the metal sector was linked to anticipation of monetary policy easing by China, a major consumer and producer of metals. China's recent announcement of plans to adopt 'moderately loose monetary policies' in the coming year, coupled with measures to stimulate consumption, marked a significant policy shift and injected a degree of optimism into the metal market.
However, the energy sector lagged behind, underperforming compared to the auto and metal sectors. This disparity in sectoral performance highlights the nuanced nature of market movements, where investor sentiment and sector-specific factors play a crucial role in determining individual stock and index performance. The overall range-bound nature of the indices indicates a state of market indecision, with investors preferring to remain on the sidelines until the crucial inflation data is released and its implications for monetary policy become clearer. The relatively subdued trading activity underscores the market's sensitivity to macroeconomic factors and the significant influence of global economic trends on domestic market dynamics.
Expert commentary offered varying perspectives on the market's near-term outlook. Ashish Bahety, Director of NAV Investment, suggested that a positive and cooling inflation data could potentially trigger a 25 basis point rate cut by the US Federal Reserve in its upcoming meeting, leading to a surge in the Nifty index, possibly reaching the 25,200 mark. Conversely, Bahety cautioned that a lack of a rate cut or negative inflation data could result in a correction, potentially pushing the Nifty down to its 20-day moving average at 24,200. Bahety also highlighted the post-election market reactions, characterizing the current range-bound movement as an attempt to establish a stable base and fill gaps created earlier in the year. The outperformance of mid-cap and small-cap stocks in the preceding two weeks was attributed to the influence of domestic mutual fund liquidity.
Sandip Agarwal, Fund Manager and Co-founder of Sowilo Investment Managers LLP, offered a more cautious assessment regarding the impact of China's monetary easing measures. Agarwal suggested that while China might periodically attempt to revitalize its economy through such measures, the resulting optimism is likely to be short-lived. Agarwal emphasized that China's structural advantages, including its large-scale production capabilities and low labor costs, are diminishing, leading to a growing preference for 'China plus one' strategies among businesses seeking to diversify their supply chains. Agarwal also noted that Foreign Institutional Investors (FIIs) had initially leveraged the China trade for short-term gains but subsequently shifted their focus back to Indian markets after recognizing the inherent weaknesses in the Chinese economy. The net purchases by FIIs in December, amounting to nearly Rs 14,000 crore, were highlighted as evidence of this shift in investment sentiment.
Within the domestic market, the cement sector witnessed a notable development, with dealers initiating price increases for the first time in 4-5 months. This price hike was attributed to several factors, including a rise in demand from the real estate sector, improved labor availability after the festive season, and a surge in infrastructure orders. Several cement companies, including ACC, Ambuja Cement, Birla Corp, Dalmia Bharat, JK Cement, JK Lakshmi Cement, Prism Cement, and Star Cement, saw their share prices rise by 0.5–4 percent in response to this positive development. Individual stock performance within the Nifty 50 index showed mixed results, with Bajaj Finance, Britannia, Shriram Finance, BPCL, and UltraTech Cement among the top gainers, while Adani Ports, JSW Steel, HCLTech, SBI, and RIL were among the top losers. This diversity in stock performance underscores the sector-specific nature of market fluctuations and the need for a nuanced approach to investment decisions.
In conclusion, the Indian stock market displayed a range-bound movement influenced by anticipation of key inflation data from both the US and India. While certain sectors, such as auto and metals, exhibited positive performance, the overall market sentiment remained cautious. Expert analysis offered diverse perspectives on the market's future trajectory, highlighting the significance of macroeconomic factors and global economic trends in shaping investment decisions. The price hike in the cement sector and the shift in FII investment towards India further underscore the dynamic and multifaceted nature of the Indian stock market.
Source: Sensex, Nifty remain rangebound for third session ahead of US CPI; auto, metal stocks shine