Festive Cheer Spreads To The Markets Too

The domestic indices sustained their rally, with IT stocks taking the lead, fuelled by heightened optimism following the Federal Reserve’s dovish stance on interest rates 

The Indian frontline indices have sustained their strong upward momentum, although the pace was slower compared to last fortnight. Similar to many global indices, domestic indices received a significant lift following the Federal Reserve’s decision to maintain interest rates while unexpectedly signalling potential rate cuts in 2024, and thereby adopting a dovish stance. Thus buoyed by growing optimism, both foreign institutional investors (FIIs) and domestic institutional investors (DIIs) remained net buyers. 

FIIs reported a substantial inflow of ₹12,436.10 crore in the last two weeks, while DIIs further bolstered market support with an inflow of ₹6,501.64 crore. The BSE Sensex and Nifty 50 recorded gains of 1.84 per cent and 1.81 per cent, respectively, over the fortnight period, reaching new all-time highs on the stock exchanges. The BSE Mid-Cap index registered a gain of 1.68 per cent, and notably, the BSE Small-Cap index outperformed the main indices with a gain of 2.18 per cent. Investor optimism could be witnessed across various sectors, with all the sectoral indices trading higher except for BSE Auto. 

Automakers are preparing for a period of moderate sales after achieving record highs in 2023. Furthermore, the industry is gearing up to embrace green technologies, particularly the adoption of electric vehicles. The tide shifted favourably for IT stocks as global recessionary concerns alleviated, instilling renewed confidence among investors in the sector. This upbeat sentiment followed a reassuring comment from the Federal Reserve, particularly significant for major Indian IT companies, given that a substantial amount of their revenue is derived from the US market. 

Additionally, a substantial correction that rendered IT stocks available at attractive discounted prices proved enticing for investors, prompting them to seize the investment opportunity. Consequently, the BSE Information Technology index emerged as the top-gaining sectoral index, registering gains of over 6 per cent. The BSE Metals index also witnessed positive momentum, experiencing gains of around 5 per cent. Metal mining stocks experienced a rally following several developments, including the Union Ministry of Mines’ announcement of directly sanctioning exploration projects to notified agencies. This move is aimed at boosting exploration efforts for critical minerals in the sector.

While the coal and mines minister expressed that India is expected to have a surplus in coal production by the year 2025-26, domestic coal-based power generation increased substantially. In other developments, the Ministry of Labour and Employment reported a modest increase in retail inflation for farm workers in November, reaching 7.37 per cent, attributed to the higher prices of specific food items. The Index of Industrial Production (IIP) in India reached a 16-month peak, recording a growth of 11.7 per cent in October. This impressive rise can be attributed mainly to the double-digit growth observed in the manufacturing, power, and mining sectors’ output.