Market Inches Higher Amid Year-End Lull and IPO Frenzy
The Indian stock market managed to eke out modest gains on Wednesday, December 27, 2024, in a session marked by volatility and the debut of five new IPOs. While the benchmark indices, Nifty and Sensex, pared some of their early gains, a strong showing from the auto and pharma sectors provided the necessary সমর্থন to keep the market in the green. With just two trading sessions left in the year, investor activity remained subdued, typical of the holiday season. The focus is now firmly shifting towards the upcoming third-quarter earnings and the Union Budget, which are expected to set the tone for the market in the coming months.
A Close Look at the Indices: Sensex and Nifty's Modest Rise
The 30-share Sensex closed 226.59 points, or 0.29 percent, higher at 78,699.07, after fluctuating throughout the day. The broader Nifty 50 index also mirrored this trend, gaining 63.20 points, or 0.27 percent, to settle at 23,813.40. Trading volumes were thin, reflecting the year-end lull.
Sectoral Winners and Losers: Auto and Pharma Shine, Metals and PSU Banks Underperform
The day's clear winners were the auto and pharma sectors. The Nifty Auto index climbed as much as 1.3 percent, fueled by upgrades from DAM Capital on several auto stocks. The brokerage cited recovery prospects despite near-term headwinds, upgrading Tata Motors, Escorts Kubota, and Bajaj Auto to "buy" and setting a particularly bullish target price of Rs 9,750 for Bajaj Auto. The Nifty Pharma index also advanced 1.3 percent, with heavyweights like Dr. Reddy's, Sun Pharma, Cipla, and Lupin leading the charge. The Nifty Bank and FMCG indices posted modest gains of 0.5 percent each.
On the losing side, the Nifty PSU Bank, Metal, and Oil & Gas indices faced selling pressure. Metal stocks, in particular, were hit hard, with majors like Hindalco, Tata Steel, Vedanta, and NMDC dragging the metal index down by almost a percent.
Midcaps and Smallcaps: A mixed bag
The broader market saw a mixed performance, with the midcap index ending 0.3 percent lower and the smallcap index rising 0.2 percent. Market experts believe that the action in the broader market is largely stock-specific, with investors advised to focus on companies with clear earnings visibility and attractive valuations.
IPO Bonanza: Five new listings on the bourses
December 27th was a busy day for the primary market, with five companies making their stock market debut:
- DAM Capital Advisors: Listed at a 39 percent premium (Rs 393) over its issue price of Rs 283.
- Transrail Lighting: Debuted at a 37 percent premium (Rs 590) over its issue price of Rs 432.
- Mamata Machinery: Saw a stellar listing, opening at a 147 percent premium (Rs 600) over its issue price of Rs 243.
- Sanathan Textiles: Listed at a healthy 32 percent premium (Rs 422.3) over its issue price of Rs 321.
- Concord Enviro: Debuted at an 18 percent premium (Rs 826) over its issue price of Rs 701.
These listings, mostly at significant premiums, reflect the continued investor appetite for new offerings, particularly in a market that has seen robust returns in recent years.
Expert's take on market outlook "The market outlook for the remainder of the year is expected to remain muted, given that returns have been robust over the past three years, with this calendar year delivering around eight to nine percent returns so far," Aishvarya Dadheech, Founder and CIO of Fident Asset Management said. "Market performance will hinge heavily on earnings growth, projected at four to five percent for FY25 and 14 to 15 percent for FY26," he added. He added January 2025 will likely be influenced by Q3 earnings, as no major warnings have emerged so far, barring select exceptions like Godrej Consumer. IT could post a strong start, and if BFSI and consumption sectors support, Q3 could be a positive quarter. However, any negative surprises in earnings could lead to heightened volatility. Risks to the market include inflation, particularly in agriculture, and further depreciation of the rupee against the dollar, which could drive FII selling and create additional pressure on equities.
Nifty's technical viewpoint "Despite swift pullbacks each time the index approached 23,700 this week, the formation of hammer candlestick patterns signals underlying bullish sentiment. This supports the target of 24,165 set earlier in the week. The downside marker remains at 23,600, while a break above 23,900 could prompt an aggressive pursuit of further gains," says Anand James of Geojit Financial Services.
Top Gainers and Losers on the Nifty:
- Gainers: Dr. Reddy's, M&M, IndusInd Bank, Eicher Motors, Bajaj Finance
- Losers: Hindalco, SBI, ONGC, Coal India, BEL
A market poised for earnings and budget cues
The Indian stock market's performance on December 27th, while modestly positive, reflects a broader sense of cautious optimism mixed with year-end quietude. The strong showing of the auto and pharma sectors, along with the successful IPO listings, provides some positive signals. However, the underperformance of metal and PSU bank stocks, coupled with the rising India VIX, indicates lingering uncertainties. The market is clearly looking ahead to the third-quarter earnings season and the Union Budget for direction. These events will likely determine whether the market can sustain its upward momentum or face a period of correction. The coming weeks will be crucial in shaping investor sentiment and setting the stage for the market's performance in the new year. The current market scenario underscores the importance of a balanced investment approach, with a focus on fundamentally strong companies and a keen eye on macroeconomic factors and policy developments. The performance of the newly listed companies will also be closely watched, providing insights into investor appetite for new offerings and specific sectors.
