Market Recovers Partially, Led by Auto and Finance Stocks

After a challenging fortnight that saw the Indian markets tumble by 4-5 per cent, the benchmarks staged a partial recovery at the start of the new year. The BSE Sensex surged 1.51 per cent, while the Nifty 50 index climbed 1.77 per cent during the fortnight. A key driver of this rebound was the upbeat performance of the global markets, which infused optimism into Indian equities. American and European stock futures rallied following a year-end selloff, as traders returned after the New Year’s break.

Additionally, with investors eagerly anticipating Q3 results, positive business updates from key sectors such as automotive and financials have fuelled expectations for robust Q3 earnings. The optimism extended to the broader markets as well, with the BSE Mid-Cap index rising 1.54 per cent and the BSE Small-Cap index rallying 1.75 per cent. The sectoral landscape saw a dramatic turnaround, with most of the indices recovering after steep declines in the previous trading sessions.

While the automotive and oil and gas sectors spearheaded the rebound, metals, real estate, and power remained in the red territory. The automotive stocks surged ahead, driven by heavyweight performers, propelling the Nifty Auto index to a six-month high. This rally was fuelled by better-than-expected sales figures as automotive sales rose for the third consecutive month in December, closing the calendar year 2024 at a record 4.3 million vehicles.

Upstream oil stocks gained momentum as oil prices hit a two-month high, driven by optimism that global policy support would revive the economies and boost fuel demand. Shares of Oil India soared more than 14 per cent during the fortnight, drawing strong investor interest. Meanwhile, India’s petroleum product demand is projected to grow by 3-4 per cent in FY25, according to a report by Fitch Ratings.

The metal sector continued to face a persistent selling spree, with fund managers and experts advising caution. Many suggest holding off on metal sector investments until there is greater clarity on key factors such as China’s stimulus measures, the pace of its recovery, and the trade policies under the Donald Trump administration 2.0 in the United States. Foreign institutional investors (FIIs) continued their selling streak, offloading equities valued at around `17,364 crore.

The new year of 2025 began with a partial recovery, driven by positive updates from the automotive and financial sectors, raising expectations for strong Q3 earnings. Will it meet those expectations?

In contrast, domestic institutional investors (DIIs) supported the market by injecting `20,181 crore. In other developments, GST collections for December 2024 showed a 7.3 per cent year-on-year growth compared to December 2023, according to official data. However, the collections declined by 2.97 per cent month-on-month, reaching a three-month low due to slower consumption. Do you think the market will be able to sustain its recovery? Stay tuned for updates on Q3 results, which will offer valuable insights and help chart the market’s future direction. Till then, investors would do well to wait and watch.