Indian Stock Market Records Upward Trend: Key Factors Driving Optimism

Indian Stock Market Records Upward Trend: Key Factors Driving Optimism

VoM News Desk | December 27, 2023 | 12:42 PM IST | Breaking News | Follow on Google News

Indian Stock Market Records Upward Trend: Key Factors Driving Optimism/Reuters

Indian Stock Market Records Upward Trend: Key Factors Driving Optimism

The domestic stock market has maintained an upbeat trajectory, with the Sensex and Nifty, prominent equity benchmarks, exhibiting a consistent upward trend across the last four trading sessions. December has seen impressive gains of over 7%, following a significant 5% surge in the previous month. Year-to-date figures reveal a remarkable 17.3% gain for the Sensex and an 18.4% leap for the Nifty 50.

Several contributing factors are fuelling this recent market surge:

1. Rate Cut Expectations: As US inflation eases, market participants are proactively investing, anticipating potential interest rate reductions by the US Federal Reserve as early as March next year. The CME FedWatch tool indicates an over 80% likelihood of rate cuts commencing in March, with a projection of more than 150 basis points of easing for 2024. Lower interest rates stimulate capital inflow, potentially bolstering company profits and subsequently, market sentiment.
2. Robust Economic Outlook: Forecasts indicate a resilient GDP growth of 6.5% for India in 2024-25 by Fitch Ratings. This comes after a robust 7.7% expansion in GDP during April-September this year. Economists remain optimistic, anticipating sustained growth momentum throughout the upcoming quarters.
3. Strong FPI Investments: Foreign Portfolio Investors (FPIs) have been actively injecting funds into the Indian financial market, with an infusion of approximately ₹78,903 crore in December alone (as of December 26). This increased activity is linked to expectations of rate cuts, alongside India’s promising economic growth prospects.
4. Retail Investors’ Influence: The rising presence of retail investors has significantly bolstered the resilience of the domestic market, counteracting selling pressure from foreign investors. Data indicates a notable surge of over 27% in retail investors year-on-year, contributing to market stability and reduced volatility.
5. Shift to Large-Cap Stocks: Investors are redirecting their focus from mid and small-caps to large-caps due to perceived valuation comfort. Analysts emphasize prioritizing high-quality blue-chip stocks with strong performance and clear earnings visibility amidst a fervent mid and small-cap segment.

This collective optimism, driven by factors such as expected rate cuts, positive economic outlook, increased FPI investments, growing retail investor participation, and the shift to large-cap stocks, continues to fortify the buoyant sentiment in the Indian stock market.

VoM News Desk

VoM News is an online web portal in jammu Kashmir offers regional, National & global news.