Markets likely to get cautious start on Wednesday

Indian markets ended sharply lower on Tuesday as a record-high trade deficit dampened sentiments. Also, investors remained cautious ahead of key policy decisions from the US Fed, BoJ, and BoE. Today, markets are likely to get cautious start as investors await the US Federal Reserve’s interest rate decision. Foreign fund outflows likely to dent sentiments. Foreign institutional investors (FIIs) has extended their selling as they sold equities worth Rs 6,409 crore on December 17. However, fall in crude oil prices overnight likely to aid domestic sentiments. Oil prices slid amid renewed demand worries in the wake of economic data from Germany and China. Some support may come as Finance Minister Nirmala Sitharaman said the lower-than-expected GDP growth of 5.4 per cent in the second quarter was a temporary blip and the economy will see healthy growth in the coming quarters. Traders may take note of Union New & Renewable Energy Minister Pralhad Joshi’s statement that renewable energy capacity addition in the country almost doubled to 15 GW during the April-November period of this fiscal year, compared to a year ago, and the country is all set to become the renewable energy capital of the world. There will be some buzz in sugar stocks as industry body ISMA said sugar production declined 17 per cent to 61.39 lakh tonnes till December 15 of the current marketing year that started in October as against 74.05 lakh tonnes in the corresponding period of the preceding year, mainly due to fall in output in Maharashtra. Metal stocks will be in focus with a private report that India is likely to impose a safeguard duty or temporary tax of up to 25% on steel imports, to help to curb cheap imports from top producer China. There will be some reaction in stocks related to gold jewellery as rating agency ICRA in its report stated that the domestic gold jewellery consumption in value terms is expected to continue its growth momentum in the current financial year and is likely to witness an on-year rise of 14-18 per cent. It said in FY25, gold jewellery consumption growth is pegged at 14-18 per cent in value terms, led by favourable realisations. Meanwhile, shares of three mainline firms - One Mobikwik Systems, Vishal Mega Mart, and Sai Life Sciences scheduled to list on the bourses today.

The US markets ended lower on Tuesday as investors parsed economic data and girded themselves for a series of central bank decisions, including an expected rate cut from the Federal Reserve. Asian markets are trading in green on Wednesday as investors assessed trade data out of Japan ahead of a Bank of Japan rate decision this week. 

Back home, falling for the second day in a row, Indian equity benchmarks witnessed a sharp decline and ended with losses of over a percent on Tuesday amid a global selloff and investor caution ahead of the US Federal Reserve’s interest rate decision. Heavy selling pressure in Telecom, Metal and Auto shares, along with depreciating rupee, added to the market woes. Markets made a negative start and drifted lower throughout the day as traders were anxious with data released by the commerce department showing that India’s trade deficit reached a record high of $37.8 billion in November, amid a surge in merchandise imports, mainly driven by a 4.3-time jump in inbound shipments of gold. Imports increased by 27% to a record of almost $70 billion during the month. On the other hand, exports contracted 4.8% to a 25-month low of $32.1 billion in November. The contraction came in a month after witnessing robust 17% Y-o-Y growth in October, which was due to inventory-building by the West ahead of the Christmas season. Markets extended fall in late afternoon deals, as sentiments remained down-beat with CRISIL’s report stating that high interest rates and fiscal consolidation have contributed to slower economic growth for India in the current financial year (FY25) so far. India’s real gross domestic product (GDP) is likely to move closer to trend growth of 6.5-7 per cent this year. It added some technical factors such as net product taxes and the GDP deflator have also disrupted the GDP’s trajectory. Adding to investor caution, exchange data showed Foreign Institutional Investors (FIIs) offloaded equities worth Rs 278.70 crore on Monday. Traders overlooked the country's G20 Sherpa Amitabh Kant’s statement that India's circular economy could generate a market value of over $2 trillion and create 10 million jobs by 2050. He said the circular economy can be a driver of growth, and this transition not only promises cost savings but also positions India to capitalise on the global circular economy market. Finally, the BSE Sensex fell 1064.12 points or 1.30% to 80,684.45, and the CNX Nifty was down by 332.25 points or 1.35% to 24,336.00.