Indian Stock Market Maintains Positive Outlook Amid Recovery Signals

The Indian stock market has sustained a positive outlook over the past week, driven by a notable shift in sentiment from foreign institutional investors (FIIs) returning to India. This positive trend coincided with encouraging indicators from the core sector output recorded in October and a stable service PMI that reflects signs of recovery, as noted by financial experts.

A significant factor contributing to this upbeat sentiment is the expectation of a more dovish monetary policy from the Reserve Bank of India (RBI). Recent moves by the RBI, including adjustments to growth forecasts for the fiscal year 2025, have bolstered market confidence. The RBI reduced the Cash Reserve Ratio (CRR) by 50 basis points to enhance liquidity in the financial system, yet emphasized the importance of maintaining macroeconomic stability.

On Friday, the stock market closed with minimal changes, with the Sensex settling at 81,709.12 and the Nifty ending at 24,677.80. Importantly, the Nifty has managed to hold above the crucial support level of 24,650. Technical analysts, including Om Mehra from SAMCO Securities, indicate that the primary trend remains positive, as the Nifty is trading near the upper band of the Donchian Channel, suggesting a potential bullish momentum on the horizon.

Additional indicators, such as India's volatility index (VIX), remain stable, hovering below the 15 mark. This points to a contraction in market volatility, indicating reduced fear among investors.

Many investors are now focusing on momentum stocks, fueled by the anticipated increase in government capital expenditure, which is expected to provide a significant boost to various sectors, including infrastructure, capital goods, real estate, cement, and metals during the second half of the fiscal year.

Within this context, public sector banks have outperformed, benefiting from the RBI's liquidity measures. As we look ahead to the upcoming February monetary policy meeting, the mood is cautiously optimistic, largely because inflation is predicted to ease in the fourth quarter. Factors such as seasonal corrections in vegetable prices and an expected increase in kharif harvest arrivals are likely to contribute to moderating inflation.

Though inflation rates may be slightly elevated, they are still expected to remain under control. Analysts, including Siddarth Bhamre from Asit C Mehta Investment Intermediates Ltd, are optimistic that factors such as soil moisture levels and reservoir conditions will lead to a decline in food inflation, which has been a persistent concern.

As the week progresses, market dynamics may shift based on the release of important US economic data, including payroll numbers and consumer price index (CPI) inflation figures. These updates are expected to provide insights into the U.S. Federal Reserve's plans for its December meeting, which could further influence investor sentiment and market movement.

Market, Economy, Recovery