Indian Stock Market Holds Positive Outlook Amid FII Inflows And Economic Recovery Signs

The Indian stock market maintained a positive outlook throughout the week, buoyed by a recovery in core sector output for October and stability in the service PMI data, experts said on Saturday. A significant factor behind this positive momentum has been the return of foreign institutional investors (FIIs), who are increasingly optimistic about a dovish monetary policy by the Reserve Bank of India (RBI).

FIIs Boost Market Sentiment With Expectations Of Dovish RBI Policy

FIIs have resumed their investments in India, driven by expectations of a more accommodating monetary policy from the RBI. Vinod Nair, Head of Research at Geojit Financial Services, highlighted that the RBI’s revision of its growth forecast for FY25, along with a reduction in the cash reserve ratio (CRR) by 50 basis points, has helped boost market sentiment. “While increasing liquidity in the financial system, the RBI has emphasized that macroeconomic stability remains paramount,” Nair said.

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Market Maintains Steady Growth Despite Flat Closing

On Friday, the market closed flat, with the Sensex settling at 81,709.12 and the Nifty ending at 24,677.80. Despite the flat close, the Nifty held steady above the critical 24,650 support level, signaling stability. According to Om Mehra, Technical Analyst at SAMCO Securities, “The primary trend remains positive, as Nifty trades near the upper band of the Donchian Channel, indicating potential bullish momentum.”

Volatility Subdued And Investors Eye Momentum Stocks

India’s volatility index (VIX) has remained subdued, staying below the 15 mark, which signals a contraction in market volatility and reduced fear among investors. With market uncertainty easing, investors have turned their focus to accumulating momentum stocks, especially as an expected increase in government capital expenditure (capex) could drive growth in infrastructure, capital goods, realty, cement, and metal sectors in the second half of the fiscal year.

PSU Banks Outperform, Positive Outlook For Inflation Control

Public sector (PSU) banks have outperformed this week, benefiting from the liquidity boost provided by the RBI’s CRR reduction. Market watchers are optimistic about the February monetary policy meeting, with inflation expected to moderate in Q4. Seasonal corrections in vegetable prices, the arrival of the kharif harvest, and an anticipated good rabi harvest are likely to ease inflationary pressures, said experts.

Siddarth Bhamre, Head of Institutional Research at Asit C Mehta Investment Intermediates Ltd., noted that food inflation, a key concern, may show signs of decline due to favorable weather conditions and improved agricultural outputs.

Market Outlook For The Coming Week

Looking ahead, the market’s direction will be influenced by upcoming data, including the US payroll numbers and US CPI inflation report. These figures will provide insights into the Federal Reserve’s stance at its December meeting and could have implications for global markets, including India.