GDP slowdown looms on market outlook even as bulls lift Sensex, Nifty 1% today; investor focus may turn to RBI

While the weak GDP data is expected to dampen the market sentiment in the immediate term, experts said it could also have potential implications on monetary policy easing and broader investor confidence.

The market’s focus would now shift to geopolitical developments and the release of China’s manufacturing PMI data on Saturday, said Siddhartha Khemka, Head of Research, Wealth Management at Motilal Oswal Financial Services. “Investor sentiment will be directed by global cues and FII activity, and we expect the market to remain range-bound amidst mixed signals and the absence of strong domestic triggers,” said Khemka.

At the same time, the subdued GDP growth could increase the probability of a rate cut in February, said Vinod Nair, Head of Research at Geojit Financial Services. “While the market may witness some short-term repercussions from the weak GDP data, investors will likely focus on the Reserve Bank of India’s upcoming monetary policy, which could offer relief if a rate cut materialises,” said Nair.

Market outlook

While today’s rally signalled renewed strength, the market faces potential headwinds from weak domestic GDP data and mixed global cues, including China’s PMI data due over the weekend. Experts said that the market could remain range-bound in the near term, with key technical levels and FII activity playing a critical role in determining its trajectory.

Analysts see technical indicators improving for the Nifty. The market is potentially in a ‘bear trap’ following the previous session’s steep fall, said Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities. “The market seems to have found support around 23,900 levels and bounced back. Further upmove is expected, with Nifty likely to challenge the immediate hurdle of 24,350 and move higher by next week,” Shetti said.

A sustained move above the immediate resistance of 24,350 could propel the index toward 24,800-25,000, said Mandar Bhojane, Technical Analyst at Choice Broking. The short-term trend of Nifty has turned bullish, helped by a rise in heavyweight stocks today, said Devarsh Vakil, Deputy Head Retail Research at HDFC Securities.

Here were the key factors driving today’s rally:

Attractive valuations after recent correction

The recent correction in Indian equities has made valuations more appealing, spurring selective buying. The Nifty 50 and Sensex had declined by nearly 8 percent from their September highs, with the Nifty’s price-to-earnings (P/E) ratio moderating from 25.8 in October to an estimated 21x currently.

“After Indian equities' recent correction, the current market offers opportunities for stock selection as pockets of attractive valuation exist,” said Ashish Ranawade, Head of Products at Emkay Wealth Management. Similarly, Mahesh Patil, CIO at Aditya Birla Sun Life AMC, said, “The markets are at good levels now after the recent correction.”

Domestic buying interest amid confidence in India’s growth story

Renewed confidence in India’s growth prospects and the government’s stability following the Maharashtra election results supported a robust domestic buying trend. “There is a lot of renewed buying interest in markets, especially from domestic institutions. The structural undercurrent from domestic investors remains strong, offsetting FII selling,” said Nirav Karkera, Head of Research at Fisdom.

Further, there was increased activity in discretionary and defensive sectors, said Vinod Nair, Head of Research at Geojit Financial Services. Festive season demand boosted interest in auto and consumer goods stocks, while pharma and healthcare sectors rebounded due to strong earnings and moderated valuations, said Nair.

Broad-based sectoral gains, heavyweights lift indices

Significant gains were recorded across key sectors, with pharma, auto, and IT stocks leading the charge. The Nifty Pharma index surged 2.35 percent, while Nifty Healthcare rose 2.04 percent, supported by stocks like Sun Pharma (up 2.69 percent) and Cipla (up 2.76 percent).

Auto stocks also gained, with the Nifty Auto index up 1.01 percent, led by Mahindra & Mahindra (up 2.38 percent) and Maruti Suzuki (up 0.97 percent). IT stocks saw modest gains, with TCS rising 0.60 percent and HCL Tech up 0.46 percent.

Heavyweights Bharti Airtel (up 4.28 percent) and Reliance Industries (up 1.7 percent) provided strong support to the rally, further lifting market sentiment.

Technical support signals a comeback of bulls

Technical indicators suggested a renewed bullish trend. Shetti said that Thursday’s dip filled the upside gap from November 25, potentially setting the stage for a sustained recovery.

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