Gift Nifty at 23,870 indicates a gap-down opening of about 100 points for Nifty on Wednesday amid weak global cues. The market is now facing a double whammy of earnings slowdown and higher inflation. With foreign portfolio investors continuing their selling without relaxing, analysts expect the market to remain under a bear grip, they added.
Analysts see pressure in the mid-cap and small-cap sectors to be more telling as most companies fail to meet market expectations. Jefferies India downgraded full-year earnings estimates for 63% of the 121 large companies it covers, the highest downgrade ratio since 2020, when the COVID-19 crisis hit. It attributed that to a cyclical slowdown in the economy.
The expensive valuations of Indian markets and the rising bond yields coupled with worries of Trump’s likely protectionist policies going ahead have continued to fuel pessimism amongst local investors, said Prashanth Tapse.
Meanwhile, Retail inflation rose to a 14-month high of 6.21 per cent in October, mainly driven by spikes in vegetable, edible oil, and precious metal prices.
Since October’s inflation is the last major print before the RBI’s December meeting, the higher-than-expected 3QFY25 inflation could influence the RBI’s policy approach. With potential bond and FX volatility spilling over from global markets and domestic growth slowing down, the RBI’s decision will not be easy, and the probability of a continued hold is rather high. Like the US, India will now have a shallower rate cut cycle ahead, said AngelOne.
Private sector banks, being relatively small, are expected to outperform. With the RBI shifting its liquidity stance to neutral, concerns for the sector should ease, said Gaurav Garg, Research Analyst at Lemonn Markets Desk.
Equities across the Asia-Pacific region were down in early Wednesday trading. The Nikkei, Hang Seng, Kospi, and Singapore’s SGX fell between 0.5 per cent and 3 per cent, tracking overnight weakness in US stocks.
Options data highlights a cautious stance among traders, with substantial call writing indicating a bearish outlook, said Dhupesh Dhameja, Derivatives Analyst, SAMCO Securities.
The highest open interest is concentrated at the 24,500-strike call (1.01 crore contracts) and the 23,500-strike put (46.09 lakh contracts). Heavy call writing from 24,000 to 24,400 reinforces resistance around 24,500, while put activity in the 23,900–23,600 range suggests support near 23,500., he further said.
“Increasing call writing from 24,000 to 24,500 signals heightened seller strength at these levels, while a decrease in put writing adds to the bearish momentum. The put-call ratio (PCR) dropped from 0.72 to 0.52, indicating cautious sentiment as sellers maintain control, placing the market in oversold territory. The options market’s “max pain” point, now at 24,200, could serve as a key level in the coming sessions,” he cautioned.
India VIX, a measure of market volatility, rose by 2.40% to end the session at 14.60. With VIX levels still below 15, conditions tend to favor bullish sentiment, as lower volatility usually supports buying interest, he added.