Indian stock indices experienced a continuation of the downward trend on Tuesday, marking a second consecutive session of losses. The primary driving force behind this negative trend is identified as profit booking, following an exceptional cumulative performance throughout 2023. Analysts also point to the concerns arising from elevated valuations.
The benchmark indices, namely Sensex and Nifty, closed Tuesday’s session 0.4-0.5% lower compared to the previous session. Ajit Mishra, Senior Vice President of Technical Research at Religare Broking, remarked on the volatile market conditions, attributing the decline to a consolidation phase. The banking, auto, and IT sectors faced pressure, but resilience in pharma and energy limited the overall damage. Mishra suggested a defensive approach, emphasizing sectors like FMCG and pharma.
Vinod Nair, Head of Research at Geojit Financial Services, highlighted investors adopting a profit booking strategy ahead of the impending results season. Despite some turbulence during events such as the Adani-Hindenburg episode and the Israel-Hamas conflict, 2023 proved to be a financially rewarding year for Indian stock market investors. Sensex and Nifty recorded gains of 18-19%, a substantial increase from the 3-4% gains in 2022.
Foreign Portfolio Investors (FPIs) played a pivotal role, turning net buyers in India’s stock market in 2023. In December alone, FPIs invested a cumulative total of Rs 66,135 crore, contributing significantly to the annual inflow of about Rs 171,107 crore. December alone accounted for over one-third of the total inflow. Notably, in November, the FPI inflow was Rs 9,001 crore.
India’s positive economic outlook, characterized by a firm GDP growth forecast, manageable inflation levels, political stability at the central government level, and indications that central banks worldwide have concluded their monetary policy tightening, has contributed to the country’s favorable investment climate.
Looking ahead to the new year, key triggers for the market include the S&P Global Manufacturing PMI and Services PMI scheduled for Wednesday and Friday, respectively. Additionally, the US Federal Reserve’s release of the latest monetary policy meeting minutes on Thursday will be closely watched for potential market impact.
