Domestic benchmarks BSE Sensex and NSE Nifty are likely to open on a positive note. However, mixed global cues will check their progress, say analysts.
China and Eurozone inflation numbers are in focus as investors seek insights into the economic outlook of these countries, per analysts.
With lack of cues, investors and traders will indulge in sector rotation that will see profit taking in some counters ahead of the Budget presentation, they added.
The Union Budget, which many believe will give some concessions to corporates and individuals to boost consumption theme, is expected to be presented in the third week of July.
At 23,590, Gift Nifty signals a positive opening as the domestic Nifty futures is hovering around 23,466.
Vinay Paharia,CIO, PGIM India Mutual Fund, expects a style rotation in the market wherein stocks driven by narratives are likely to underperform the high-growth and good quality businesses.
“We not only expect capex but consumption also to figure in the new government’s priorities. Now, with this reality check, earnings growth, return on capital, and cash flow generation capabilities would be the key drivers of performance. We continue to stick to our philosophy of investing in high-quality and high-growth companies backed by competent managements having a good capital allocation track record,” the fund house said.
ICRA, however, anticipates a slowdown in revenue growth for Indian companies in Q1 FY25 compared to Q4 FY24 due to temporary government spending halts during elections and uncertainty about rural demand during the monsoon season.
ICRA highlights positive signs in terms of operating margins and credit metrics. Operating margins are expected to remain steady at 15-18 per cent due to stable raw material costs, while credit metrics show a strong interest coverage ratio of 4.7-5.0 times.
“The global economic situation and the intensity of the upcoming monsoon season will be key factors influencing India Inc.’s performance in the near future,” it added
VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services, said, “After the roller coaster ride in the market in the first week of June, stability has returned to the market as indicated by the sharp fall in India VIX from 27 on June 4 to 12.82 on June 14. This fall in India VIX indicates the return of stability and a likely consolidation phase in the market.”
“The resilience of the market and eagerness of retail investors to buy every dip in the market will force FPIs to reduce their selling which was sustained in May. However, if the market continues to rally from here, FPIs may again turn sellers in India and buyers in other markets like Hong Kong which are very cheap compared to India,” he added.
Meanwhile, global stocks are positive. While the US stocks closed with a sharp rebound, pushing the S&P 500 to a new peak, equities across Asia Pacific region are largely up, led by Japan and Australian stocks.