Back To Red!

The last fortnight proved challenging not only for the Indian markets but also for the global markets, with the latest trigger being the release of strong US’ jobs data. The report revealed that the US economy added 2,56,000 jobs in December, significantly surpassing the consensus estimate of 1,55,000. Higher job creation translates to increased incomes, greater purchasing power, and heightened inflationary pressures, thereby reducing the likelihood of an interest rate cut, which worsens the situation for companies and businesses. 

Consequently, global markets bled red in reaction to these developments. The Indian benchmarks, BSE Sensex and Nifty 50, which had been attempting to recover from previous declines, extended their losses and plunged to eight-month lows, raising concerns among investors. However, fears were alleviated when Nifty 50 held above the critical 23,000 level, finding much-needed support in the 23,100–23,200 range. Broader indices experienced an even steeper downturn, with the BSE Mid-Cap index and BSE Small-Cap index plunging 6.76 per cent and 6.78 per cent, respectively 

Bearish investor sentiment was evident across the sectoral landscape, as all sectoral indices ended the fortnight deep in the red. Sectors such as real estate, healthcare, banking and automotive bore the brunt of the damage, while metals and oil and gas, already heavily battered, faced comparatively lighter selling pressure. The real estate sector, after experiencing strong success, is now facing challenges as housing sales in India’s prime residential markets dropped by 26 per cent across eight major cities during the October-December period of 2024. 

The banking and financial services sectors are under pressure, as several banks are missing profit expectations due to slower loan growth and higher provisions for bad loans. Additionally, rising non-performing assets (NPAs) in personal loans and microfinance are adding to the sector’s challenges. Infrastructure spending was expected to be a key focus in the upcoming Union Budget, bolstering bullish sentiment for the metals sector. After a 22 per cent drop in the BSE Metals index over the last three months, metal stocks rebounded sharply last week, with Tata Steel rising 6 per cent and most index constituents climbing 9-10 per cent in just four trading sessions. 

Foreign institutional investors (FIIs) continued to be net sellers during the fortnight, divesting equities worth over ₹42,000 crore. Meanwhile, domestic institutional investors (DIIs) provided notable support to the market, injecting ₹46,800 crore. US President Donald Trump’s policies post-inauguration, the Union Budget 2025, and the outcome of the RBI MPC meeting regarding a potential rate cut will be the key factors guiding market movements in the near future. Stay tuned for updates! 

Can the Nifty 50 sustain the crucial 23,000 level amid Donald Trump’s post-inauguration policies, Q3 earnings from Indian Inc, the Union Budget 2025, and the RBI MPC’s decision on a potential rate cut?