From RBI coverage to pre-budget rally – consultants spotlight 3 near-term key triggers for Indian inventory market

Indian inventory markets have been buying and selling barely larger after opening flat on Monday. Nonetheless, promoting stress is rising following final week’s launch of lower-than-expected Gross Home Product (GDP) numbers. India’s GDP progress has slowed to five.4%, marking the bottom progress fee in two years.

ICICI Direct Analysis reported that the GDP for Q2 FY25 was decrease than market expectations, recorded at 5.4% in comparison with the anticipated 6.5%. Moreover, Actual Gross Worth Added (GVA) grew by 5.6% in Q2 FY25, reflecting a slowdown from 7.7% in the identical interval final yr.

The Nifty 50 index started the day with a modest acquire of 9 factors, reaching 24,140 factors, indicating some constructive momentum. In the meantime, the Sensex index opened at 79,743.87, down by 58 factors.

Trying forward, market consultants counsel that the Nifty 50 is prone to stay cautious as a consequence of a number of adverse elements. These embrace threats of tariffs from Trump, persistent inflation pressures within the US, and the latest launch of the US PCE index, which is the Federal Reserve’s most popular inflation gauge. Moreover, the strong financial momentum within the US, and bettering shopper prospects add complexity to the outlook for rate of interest coverage within the coming yr.

Market consultants counsel that the subsequent three triggers to overview instantly are the Reserve Financial institution of India’s (RBI) stance on rate of interest cuts, better-than-expected Q3 earnings, and the upcoming pre-budget rally.

Three triggers to overview within the near-term

RBI stance on rate of interest reduce

All eyes at the moment are on the upcoming Reserve Financial institution of India’s Financial Coverage assembly scheduled for December 4 to six, 2024. The choice shall be introduced on December 6 by RBI Governor Shaktikanta Das at 10 AM. Since February 2023, the Reserve Financial institution has maintained the repo fee, or short-term lending fee, at 6.5%.

There may be appreciable dialogue on D-Road about whether or not there shall be a fee reduce or whether it is prone to be postponed till the assembly in February 2025.

Dr. V Okay Vijayakumar, Chief Funding Strategist, Geojit Monetary Providers said that RBI is prone to reduce Money Reserve Ratio (CRR) on December 6. With Shopper Value Index (CPI) inflation at 6.2%, which is above RBI’s tolerance restrict, the Financial Coverage Committee (MPC) can’t reduce charges on December 6.

Prashanth Tapse, Analysis Analyst, Senior Vice President of Analysis at Mehta Equities, highlighted that globally rates of interest have began coming down, however India remains to be holding its charges tight, with good room to chop charges. We are able to anticipate a 25 to 50 bps fee reduce on it earlier than price range 2025, which may help the economic system and progress, which appears prone to be degrowing. I really feel a fee reduce is the necessity of the hour to stimulate markets and sentiments.

“The speed reduce expectation in its upcoming December 6 MPC assembly is probably going acquire traction as RBI since previous few conferences was highlighting that there isn’t a urgency to help progress. Even when RBI postpone the speed reduce to February 2025 assembly, it might point out for a benign liquidity atmosphere going ahead and will present some steerage for fee reduce in subsequent assembly which itself will present reduction to each fairness and debt markets,” added ICICI Direct Analysis.

Higher than anticipated Q3 earnings

The earnings season for the quarter ending in December (Q3 FY25) will start within the second or third week of January, beginning primarily with main IT firms like TCS and Infosys. After a disappointing Q2 earnings season, the market is hoping for a modest restoration in Q3 earnings.

“Q1 and Q2 earnings have to date been disappointing including gas to the market sentiments and now traders will anticipate Q3 earnings outcomes which might begin from January tenth 2025 onwards,” added Prashanth Tapse.

In response to Dr. V Okay Vijayakumar, a light restoration in Q3 earnings might be anticipated on the again of pageant season gross sales. However we should wait until This fall for some silver linings. Even in This fall robust restoration seems troublesome. The state of affairs can change if inflation declines and the MPC reduce charges in February.

Pre-budget rally

Prashanth Tapse highlighted that we might see full fledged price range 2025 after the brand new govt has fashioned which may give stimulus to market. Sectors to be targeted Insurance coverage, Defence.

“Given the elevated valuations and deceleration in progress and earnings a pre-budget rally is unlikely,” added Dr. V Okay Vijayakumar.

The price range for the monetary yr 2025-26 is scheduled to be offered on February 1, 2025.

Disclaimer: The views and suggestions above are these of particular person analysts, consultants and broking firms, not of Mint. We advise traders to verify with licensed consultants earlier than making any funding determination.