NIFTY OUTLOOK FOR 7 DEC 2024

Overview: The Indian equity market witnessed a volatile trading session on December 6, closing marginally lower despite mixed sentiment. The Sensex declined by 56.74 points (0.07%) to close at 81,709.12, while the Nifty dropped by 30.60 points (0.12%) to end at 24,677.80. Midcap and smallcap indices continued their strong performance, gaining 0.3% and 0.6% respectively, reflecting optimism in broader markets.

Key Highlights:

• Market Sentiment: A narrow trading range dominated the session as the Reserve Bank of India’s (RBI) monetary policy announcements aligned with market expectations, offering no major surprises.
• Sector Performance: Gains were observed in auto, metal, FMCG, telecom, and PSU Bank sectors (up 0.3%-1%). However, IT and media sectors ended in the red.
• Stock Movers:
  • Top Gainers: Bajaj Auto, Axis Bank, SBI Life, Tata Motors, Maruti Suzuki.
  • Top Losers: Adani Ports, Cipla, Bharti Airtel, HDFC Life, Asian Paints.
• Market Breadth: Approximately 2298 shares advanced, 1529 declined, and 98 remained unchanged, reflecting a positive breadth in broader indices.

RBI Monetary Policy Insights:

• The RBI maintained the repo rate at 6.5%, citing persistent core inflation above tolerance levels.
• The Cash Reserve Ratio (CRR) was reduced from 4.5% to 4%, injecting ₹1.16 lakh crore into the financial system to support growth.
• Projections for FY25 GDP growth were revised downward to 6.6% (from 7.2%), while inflation forecasts were adjusted to 4.8% (from 4.5%).

Market Analysis:

• The Nifty sustains above the inverse head-and-shoulders breakout, suggesting a strong technical setup. A buy-on-dips strategy is recommended to capitalize on potential upward momentum, with a target of 25,500 in the short term.
• Despite the broader market optimism, minor pullbacks may follow recent rallies, emphasizing selective stock picking across resilient sectors like auto, metal, and midcaps.

Currency Market:

• The Indian Rupee appreciated due to:
  • RBI’s unchanged repo rate decision.
  • Decline in US Dollar and crude oil prices.
• The Rupee faced pressure due to the downward revision of GDP growth and inflation projections for FY25, coupled with demand for the US Dollar.
• USDINR Outlook: Expected to trade between ₹84.45 and ₹84.95. Weakness in crude oil and FII inflows may support the Rupee.

Conclusion: The Indian equity market is showcasing a cautious yet optimistic outlook amid sector rotation and mixed macroeconomic signals. While benchmark indices remained flat, broader indices displayed strength, particularly in midcap and smallcap stocks. Investors are advised to adopt a selective approach with a buy-on-dips strategy, focusing on sectors with robust growth potential.

Further cues will be shaped by global economic data, including the US non-farm payrolls report, which could influence market sentiment in the coming sessions.