Post Session: Quick Review

The local equity markets snapped their declining trend and ended with gains of over half a percent on Monday supported by strong performances in financial and IT heavyweights. Besides, softer U.S. inflation data supported the investor sentiments. Since morning, markets traded in green. As for broader indices, the BSE Mid cap index ended in green, while Small cap index settled in red.

Markets made positive start and extended their gains following the broadly positive cues from Wall Street on Friday coupled with firm trade in Asian counterparts, as traders remain optimistic on an improved outlook for interest rates after data showing a slower than expected pace of acceleration in US consumer price inflation raised hopes for more interest rate cuts by the US Fed next year. Traders took note of report that the 55th Goods and Services Tax (GST) Council meeting resulted in mixed decisions. The Council agreed to refer the proposal for a special levy for disasters to a Group of Ministers (GoM). Additionally, the Council clarified that no GST is payable on penal charges levied and collected by banks and non-banking financial companies (NBFCs) from borrowers for non-compliance with loan terms. In afternoon session, indices come off from day’s high levels but maintained their gains. Traders overlooked latest data by the Reserve Bank of India showed that India’s foreign exchange reserves fell by $1.9 billion to $653 billion, around six months low, in the week ended December 13. The reserves fell to their lowest since June 28. Besides, Monetary Policy Committee (MPC) Member Nagesh Kumar said the ongoing economic slowdown in the country has become serious enough to demand immediate policy attention. Advocating for 25 basis points (bps) cut in the repo rate during the December MPC meeting, he highlighted the urgent need to address the dual challenges of declining growth and inflationary concerns. In late afternoon session, markets added some points amid value buying.

On the global front, European markets were trading mostly in red amid worries over potential tariffs under the incoming Trump administration in the U.S. Asian markets ended mostly in green after the Federal Reserve's preferred inflation gauge came in below expectations, fueling hopes for more rate cuts by the U.S. Federal Reserve in 2025. Back home, India is finalising its trade strategy with the United States as Donald Trump prepares to return to office as President. The government is consulting with industry to identify export priorities, referred to as ‘offensive asks’, while keeping all options open, including a potential mini-trade deal and a response to Trump’s anticipated trade retaliation.

The BSE Sensex ended at 78,540.17, up by 498.58 points or 0.64% after trading in a range of 78,189.19 and 78,918.12. There were 20 stocks advancing against 10 stocks declining on the index. (provisional)

The broader indices ended mixed; the BSE Mid cap index gained 0.10%, while Small cap index was down by 0.60%. (provisional)

The top gaining sectoral indices on the BSE were Realty up by 1.39%, Bankex up by 1.00%, Metal up by 0.84%, Oil & Gas up by 0.83% and FMCG was up by 0.75%, while Telecom down by 0.35%, Industrials down by 0.22%, Auto down by 0.12%, Healthcare down by 0.04% and Consumer Disc was down by 0.03% were the top losing indices on BSE. (provisional)

The top gainers on the Sensex were ITC up by 2.07%, Tech Mahindra up by 1.81%, HDFC Bank up by 1.63%, Indusind Bank up by 1.58% and Reliance Industries up by 1.33%. On the flip side, Zomato down by 2.82%, Maruti Suzuki down by 0.89%, Nestle down by 0.55%, HCL Tech down by 0.52% and Bajaj Finserv down by 0.32% were the top losers. (provisional)

Meanwhile, Monetary Policy Committee (MPC) Member Nagesh Kumar has said that the ongoing economic slowdown in the country has become serious enough to demand immediate policy attention. Advocating for 25 basis points (bps) cut in the repo rate during the December MPC meeting, Kumar highlighted the urgent need to address the dual challenges of declining growth and inflationary concerns. He said ‘The extent of the slowdown is serious enough to warrant policy attention’.

According to the minutes of the meeting released by the Reserve Bank of India (RBI), Kumar emphasized that economic conditions have worsened significantly since the October 2024 MPC meeting. He pointed to a steep decline in India’s economic growth. The GDP growth rate for Q2 of 2024-25 has dropped to 5.4 per cent, compared to 6.7 per cent in Q1 of the same fiscal year and 8.2 per cent in 2023-24. He noted that this decline is sharper than expected and has led to a broad-based downgrade in GDP growth forecasts for the year. In light of these developments, he argued that a 25 bps rate cut could help revive economic growth without exacerbating inflation. He added that inflationary pressures might ease with seasonal corrections in prices, creating space for supportive policy measures.

He stated ‘I believe that a rate cut would help in reviving economic growth without worsening the inflationary situation, which may soften with seasonal correction in prices. Hence, I will again vote for a 25-basis point cut in the repo rate while keeping a neutral stance’. Additionally, he recommended exploring non-rate measures to improve liquidity in the economy. He suggested a 50 bps cut in the Cash Reserve Ratio (CRR) as one of the measures to enhance liquidity and support economic recovery. The December MPC meeting minutes reflect growing concerns over the state of the economy, with two out of the 6 members voting for reducing the policy rates. While other four members including former RBI Governor Shaktikanta Das voted to keep the policy rates unchanged. The next meeting of the MPC is scheduled for February 5 to 7, 2025.

The CNX Nifty ended at 23,753.45, up by 165.95 points or 0.70% after trading in a range of 23,647.20 and 23,869.55. There were 37 stocks advancing against 13 stocks declining on the index. (provisional)

The top gainers on Nifty were JSW Steel up by 2.15%, ITC up by 2.07%, Hindalco up by 1.85%, Indusind Bank up by 1.75% and Trent up by 1.68%. On the flip side, Hero MotoCorp down by 1.55%, Maruti Suzuki down by 0.73%, Nestle down by 0.55%, HCL Tech down by 0.44% and Bajaj Finserv down by 0.40% were the top losers. (provisional)

European markets were trading mostly in red; France’s CAC fell 9.29 points or 0.13% to 7,265.19 and Germany’s DAX was down by 10.21 points or 0.05% to 19,874.54. On the flip side, UK’s FTSE 100 was up by 5.66 points or 0.07% to 8,090.27.

Asian markets settled mostly higher on Monday tracking Wall Street gains last Friday as the release of softer than expected US inflation figures fuelled expectations for more interest rate cuts by the US Federal Reserve in 2025. Underlying sentiment was also underpinned by the passing of a crucial funding bill in the US, which helped avert a year-end government shutdown. Hong Kong shares gained with expectations that China will ramp up economic support measures. Market sentiments improved further as Trump indicated he would like Chinese video app TikTok to continue operating in the country, a move that could help ease tensions between US and China. Moreover Japanese shares gained, led by automakers and technology shares.