Uncertainty & Upswings Play The Balancing Game

The recent fortnight was one of the most challenging periods for both markets and investors. While the markets remained flat during the first week, they experienced one of the steepest declines in recent times during the second week. Both the BSE Sensex and Nifty 50 indices plunged by around 4.5 per cent each. The negative sentiment spread across the broader market, impacting Mid-Cap and Small-Cap stocks as well. The BSE Mid-Cap index declined by 3.03 per cent, while the BSE SmallCap index experienced a 3.33 per cent drop, reflecting the overall cautious mood among investors.

Analysing the sectoral performance, all the sectoral indices closed in the red during the fortnight, with the power, metals, oil and gas and automotive sectors bearing the brunt of the damage. Meanwhile, real estate and IT stocks remained relatively stable, while the healthcare sector, being defensive, demonstrated considerable resilience. Foreign institutional investors (FIIs), who had unexpectedly turned net buyers in the previous fortnight after a long period of selling, resumed their selling streak, offloading equities worth over ₹16,000 crore.

Meanwhile, the domestic institutional investors (DIIs) attempted to support the falling market with an inflow of ₹14,754 crore. The global investor sentiment soured after the US Federal Reserve signaled that the pace of rate cuts could be slower than anticipated. Although the Federal Reserve lowered its benchmark interest rate by 25 basis points, it revised its rate reduction outlook, now projecting only two more quarter-percentage point cuts by the end of 2025, compared to the market’s expectation of three or four cuts.

Uncertainties regarding earnings recovery, following weak Q2FY25 results from India Inc., along with slowed GDP growth and a widening trade deficit, acted as significant macroeconomic headwinds. Recently, the Indian rupee reached an all-time low of 85.11 against the US dollar. A weaker rupee tends to discourage foreign investors from investing in the Indian market as it impacts returns and increases the risk of currency fluctuations. One of the reasons behind the FII sell-off is a general trend observed over the past few years, where FIIs tend to offload their positions during the third week of December.

While the secondary market weakened due to the Federal Reserve’s slower rate cut outlook, slowed growth and a widening trade deficit, the primary market was firing on all cylinders with 13 mainboard IPOs, strong demand and attractive GMPs

This is typically before heading into their vacations for the holiday season and the New Year. While the secondary market was witnessing weakness, the primary market was firing on all cylinders, with 13 mainboard IPOs launching during the fortnight. One Mobikwik Systems Ltd. doubled investors’ wealth in just two trading sessions, while newly listed companies Inventurus Knowledge Solutions, Vishal Mega Mart and Sai Life Sciences witnessed robust rallies. Currently, there is heavy subscription activity in ongoing IPOs, and their GMPs are also very high, keeping investor interest alive. Stay tuned for further updates!