Stock Market Weekly Outlook: Key Events & Trends to Watch

The equity market saw a modest recovery during the week ending December 27, closing with nearly 1% gains. Despite this rebound, the week was largely range-bound, influenced by the holiday season and the absence of significant domestic or global triggers. Persistent concerns such as continued FII outflows, a depreciating rupee against the US dollar, and lowered expectations for interest rate cuts in 2025 continued to weigh on investor sentiment. Notably, the benchmark indices had experienced nearly a 5% decline in the preceding week.

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Market Expectations for the Week

The upcoming week is anticipated to remain range-bound, with key focus areas including the release of Manufacturing PMI data and monthly auto sales figures. In the near term, attention is likely to shift towards December quarter earnings and the Union Budget.

The Nifty 50 index rose 226 points (0.96%) to 23,813.4, and the BSE Sensex gained 657 points (0.84%) to 78,699. In comparison, the Nifty Midcap 100 and Smallcap 100 indices lagged, with gains of 0.13% and 0.22%, respectively. Sectors like banking, FMCG, auto, and pharma posted gains, while IT and metal stocks faced pressure.

Vinod Nair, Head of Research at Geojit Financial Services, remarked that the upcoming Q3 earnings will be critical in determining the market's direction. He also highlighted the influence of key data points, such as PMI figures from India, the US, and China, as well as US jobless claims, on market sentiment. The auto sector is expected to draw attention, driven by an anticipated uptick in December volumes and attractive valuations.

Key Factors to Watch

Global Economic Data:

Investors will monitor US jobs data and monthly vehicle sales figures. Additionally, final Manufacturing PMI numbers for December from major economies, including the US, Japan, China, and the Eurozone, will be closely watched.

Domestic Economic Data:

On the domestic front, several critical data points will be released:

• Fiscal deficit and infrastructure output for November, along with external debt figures for Q3CY24, on December 31.
• Final HSBC Manufacturing PMI for December on January 2, which provisionally rose to 57.4 from 56.5 in November.
• Bank loan and deposit growth (fortnight ending December 20) and foreign exchange reserves (week ending December 27) on January 3.
   

India’s foreign exchange reserves declined to $644.39 billion for the week ending December 20, down from $652.87 billion the previous week. The reserves have been steadily falling since the record high of $704.89 billion in late September.

Auto Sales:

Auto sales data for December, expected early next week, will likely influence auto stocks. Companies such as Tata Motors, Maruti Suzuki, and Hero MotoCorp are expected to show modest growth in the two-wheeler and passenger vehicle segments, while tractor sales may see strong growth. However, commercial vehicle sales are expected to remain subdued year-on-year.

FII and DII Activity:

Foreign Institutional Investors (FIIs) continued their selling streak last week, with net outflows of ₹6,323 crore, contributing to a monthly total of ₹10,444 crore in December. This marks the third consecutive month of net selling. In contrast, Domestic Institutional Investors (DIIs) compensated with robust buying, contributing ₹10,928 crore for the week and ₹27,474 crore for December. DII inflows have been instrumental in sustaining market performance, with net purchases of ₹5.2 lakh crore for the year.

Currency Movements:

The Indian rupee reached an all-time low of 85.81 against the US dollar during intraday trading on Friday, before closing at 85.368. The rupee weakened by 83 paise in December and 2.2 rupees for the year, its steepest annual decline since 2022, largely due to FII outflows and declining forex reserves. Analysts predict continued volatility, with the currency trading in a range of 85.22 to 86.40 in the coming week.

IPO Activity:

Despite market challenges, the primary market remains active. Four IPOs are set to launch next week, including Indo Farm Equipment's ₹260-crore issue on December 31. Three SME IPOs—Technichem Organics, Leo Dry Fruits and Spices, and Fabtech Technologies—will also debut.

Technical Analysis and Market Sentiment

The Nifty 50 traded within a narrow range of 23,650–23,950 last week, forming a small bullish candle with shadows on both ends, indicating indecision. Experts predict this range-bound trend to continue, with resistance at 24,000 and support at 23,650. A breakout on either side could set the market's direction. Overall, sentiment remains bearish, as the index is trading below its 10- and 20-week EMAs and within the lower Bollinger band.

Derivatives and Volatility Trends

F&O data suggests a broad trading range for Nifty 50 between 23,500 and 24,500. Key open interest levels include:

• Maximum Call OI at 24,500, followed by 24,000.
• Maximum Put OI at 23,500, followed by 23,800.
   

India VIX dropped sharply by 12.17% last week to 13.24, providing comfort to bullish investors. A sustained VIX level below 14 is expected to maintain market stability.