The Indian stock market witnessed a sharp rebound despite volatility and logged its fourth consecutive weekly gain - the longest such streak since July end, driven by a combination of improving global and domestic sentiments.
In the third week of December, investors will closely monitor key market triggers, including US Fed interest rate and other central bank decisions, domestic and global macroeconomic data, foreign fund inflows, Russia-Ukraine conflict, US bond yields, crude oil prices, and other global cues.
Domestic benchmark indices Sensex and Nifty 50 experienced a smart turnaround in the previous session propelled by bargain hunting in telecommunication, tech and consumer durable stocks amid encouraging domestic retail inflation data, which bolstered investor sentiment.
“On Friday, the markets experienced significant volatility, dipping below 24,200 before sharply rebounding to close the week at 24,768, marking a weekly gain of 0.37 per cent. This recovery was attributed to value buying in beaten-down stocks amid easing inflation and resilience in key sectors,” said dPuneet Singhania, Director at Master Trust Group.
The benchmarks gained nearly three from their recent lows. A broad-based buying spree lifted more than 40 Nifty stocks. The NSE Nifty 50 rose 0.89 per cent to 24,768.3, while the BSE Sensex gained 1.04 per cent to 82,133.12. On the weekly front, the BSE benchmark jumped 623.07 points or 0.76 per cent, and the Nifty climbed 90.5 points or 0.36 per cent.
The benchmark indices remained in a tight range throughout most of the week but closed firmly on the final day despite significant volatility. The blue chips are now about 5.5 per cent below their all-time high levels hit on September 27 after slipping into correction territory in early November.
A mixed trend in foreign investor's activity and profit-booking in global markets capped the upside. The Nifty IT index reached a new high and rallied around three per cent in the last five sessions after US inflation data met expectations, boosting hopes for a US Fed rate cut this week.
After weeks of outperformance, the broader indices also displayed a mixed trend, with the midcap index closing in the green while the smallcap index ended slightly lower. The small-cap index came out of correction territory earlier.
"A rebound from the lows suggests that the buy-on-dips strategy is working; A gradual recovery in the core sector indicates better H2 earnings than a subdued H1 FY25. It is believed that foreign fund selloff has subsided in the short to medium term, adding further impetus to the sentiment. We expect the bottom fishing strategy to continue for the week ahead," said Vinod Nair, Head of Research at Geojit Financial Services.
This week, the primary market will witness intense action as some new initial public offerings (IPO) and important listings are slated across the mainboard and small and medium enterprises (SME) segments. The week will be critical from the domestic and technical point of view as investors will track domestic developments, global markets and macroeconomic data.
Here are the key triggers for stock markets in the coming week:
US Fed Policy
The US Federal Reserve is scheduled to announce its interest rate decision on December 19. The market consensus leans towards a quarter-point rate cut to a target range of 4.25 per cent to 4.50 per cent. This move aligns with the US Fed's strategy to ease monetary policy as inflationary pressures subside. The minutes from the November 6-7 Fed meeting indicate that policymakers remain optimistic about declining inflation and a robust labour market.
“This optimism supports the potential for further rate cuts, albeit at a measured pace. However, it's essential to keep a close eye on economic indicators and Fed officials' comments for any shifts in expectations,” said Pravesh Gour, Senior Technical Analyst at Swastika Investmart Ltd.
5 new IPOs, 12 listings to hit D-Street
In the mainboard segment, Transrail Lighting IPO and Mamata Machinery IPO will open for subscription on December 19. Among the ongoing issues, Inventurus Knowledge Solutions IPO will close for bidding on December 16, while the International Gemmological Institute IPO will close for subscription on December 17. In the SME segment, three new issues will open for subscription this week.
Among listings, shares of Vishal Mega Mart, Sai Life Sciences, and MobiKwik will debut on stock exchanges BSE, NSE on December 18. Shares of Inventurus Knowledge Solutions will get listed on December 19 and shares of International Gemmological Institute will debut on December 20. Additionally, shares of seven SMEs will debut on either BSE SME or NSE SME in the coming week.
FII Activity
Foreign institutional investors (FIIs) net sold ₹226 crore in the cash market, while domestic institutional investors (DIIs) supported the market with a net investment of ₹2,880 crore during the week. The flow of foreign and domestic institutional investments will be a key driver. A strong inflow of foreign funds can bolster the market, while outflows can exert downward pressure.
Foreign portfolio investors (FPIs) took a sharp U-turn and turned net buyers on positive domestic indicators in December, snapping their robust two-month selling streak. According to the National Securities Depository Ltd (NSDL) data, FPIs invested ₹22,766 crore in Indian equities this month, and net inflows stood at ₹34,318 crore as of December 13, taking into account debt, hybrid, debt-VRR, and equities.
Global Cues
Global trends, particularly the performance of US markets and the US Fed's monetary policy decisions will play a significant role. The rupee's exchange rate and crude oil prices will be critical determinants of market direction.
Geopolitical tensions, especially the ongoing Russia-Ukraine conflict, continue to shadow global markets. Recent increases in the dollar index and US bond yields have added to the challenges emerging markets like India face. Investors will also consider the Bank of England (BoE) and the Bank of Japan (BoJ) monetary policies and US GDP data for further direction.
“The key focus will be on the US Federal Reserve meeting, where a 25 basis point rate cut is already factored in. The Fed’s commentary on future rate policy will hold significant importance. Ahead of the event, the Dow Jones Industrial Average (DJIA) has seen a notable correction, while the S&P 500 and Nasdaq Composite continue to hold their ground,” said Ajit Mishra– SVP, Research, Religare Broking Ltd.
Oil Prices
International crude oil prices climbed about two per cent in the previous session to settle at a three-week high, driven by expectations that additional sanctions on Russia and Iran could tighten supplies and lower interest rates in Europe and the US Federal Reserve could boost global fuel demand.
Brent futures rose $1.08, or 1.5 per cent, to $74.49 a barrel. US West Texas Intermediate (WTI) crude rose $1.27, or 1.8 per cent, to $71.29. That was Brent's highest close since November 22, putting the contract up five per cent for the week. WTI posted a six per cent gain on the week and closed at its highest since November 7. Back home, crude oil futures settled 1.1 per cent higher at ₹6,044 per barrel on the multi-commodity exchange (MCX).
Corporate Action
Shares of some companies will trade ex-dividend, while others will trade ex-split and ex-bonus in the coming week, starting Monday, December 16. Check full list here.
Technical View
From a technical perspective, Ajit Mishra of Religare Broking Ltd reiterates that a decisive move above 24,800 on the Nifty could trigger further recovery toward the 25,200–25,500 zone. On the downside, the 24,300–24,400 zone is expected to provide strong support on a closing basis.
“We maintain a ‘buy on dips ’ strategy, focusing on selective stock picking, with a preference for IT and banking stocks, while other sectors contribute selectively. Midcap and smallcap indices may witness some consolidation following their recent outperformance in the broader market. Traders should be selective and cautious when picking stocks in these segments,” said Mishra.
According to Pravesh Gour of Swastika Investmart, Nifty has crossed all the key moving averages with 24,850-25,000 as the immediate resistance zone. Expect higher volatility near the psychological hurdle of 25,000," he said.
"Nifty 50 has taken a bullish stance after breaking the horizontal resistance of 24,700. Strong support is at 24,100 and 24,300, making it a key trader level. Buying is favourable at around 24,300-24,400, with a stop loss at 24,100. On the upside, the index may aim to reclaim the psychological 25,000 level," said Puneet Singhania of Master Trust Group.
According to market analysts, the Bank Nifty index has established a strong base around the 52,800-53,000 range, followed by a breakout from consolidation, closing the week robustly above the 21-week and daily EMAs.
“This signals a bullish undertone, with the market favouring buy-on-dips as long as it trades above 52,700. The immediate upside target is set at 54,200, which aligns with the ongoing positive momentum. However, a breach below 52,700 could trigger a correction toward the 52,000. The overall trend appears sideways to bullish in the short term,” added Singhania.
Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. We strongly advise investors to consult with certified experts, consider individual risk tolerance, and conduct thorough research before making investment decisions, as market conditions can change rapidly, and individual circumstances may vary.
