Markets to continue being volatile

We expect the NSE Nifty to remain volatile as it will be impacted by key domestic and global factors including the outcome of Maharashtra and Jharkhand assembly elections, rising geo political tension between Russia and Ukraine, and persistent selling by foreign institutional investors.

Markets will also react to global economic data to be released this week, which includes India’s July-September quarter GDP, United States retail inflation for October, and their preliminary GDP data.

The Rs 10,000 crore mega IPO of NTPC Green Energy will be listed on the stock exchanges on Wednesday, November 27. As the wedding season has kicked off with approximately 48 lakh weddings to be held this year, sectors such as hotels, jewellery, consumer discretionary, apparels and two-wheelers are likely to benefit from the boost in demand.

Last week, Nifty closed with weekly gains of 1.4% at 23,907, driven by a sharp rally on Friday, which was the biggest single-day rally in five months. All major sectoral indices ended positive with Nifty IT gaining nearly 2%, buoyed by robust US labour market data which suggested that job growth rebounded in November.

Although the pace has slowed down, FIIs have continued to be net sellers, pulling out close to Rs 154 lakh crore, combined in October and November so far. The Russia-Ukraine war escalated in the wake of US President Joe Biden’s decision to authorise Ukraine to target Russian military sites using US made long-range weapons, which dented global market sentiments. 

The Indian rupee plunged to a record low, pressured by continuous foreign outflows and renewed strength in the dollar as investors lose hopes of aggressive rate cuts by the Federal Reserve.

China decided to withdraw export tax rebates for select products made of aluminium and copper. This is likely to tighten the supply of these products from China which in-turn will prove beneficial for Indian producers.  PSU stocks showcased a mixed reaction to the Finance Ministry’s proposal to revise norms for dividend payments, share buybacks and stock splits in order to improve capital management and performance of their equities.

There was a positive development for telecom companies as the Supreme Court ruled in their favour, granting them the right to claim tax credits on duties paid for infrastructure components like tower parts and green shelters.

On the overall results front, the Q2FY25 corporate earnings scorecard was weak, but excluding commodities, it showed an in-line earnings growth. Consumption emerged as a weak spot, while select segments of BFSI are experiencing asset-quality stress.

Weak government spending, along with excess rainfall, also hurt demand. As some of these factors self-correct in the second half of FY25, we anticipate a recovery in corporate earnings going forward. However, in the near term, we expect volatility to continue in the market.

(The author is Head- Research, Wealth Management, Motilal Oswal Financial)