Indian Market Outlook: Dependence on Global Cues, GDP Data, and FII Activity
The Indian stock market's performance on Monday will hinge on global market trends, economic data releases, and the activities of Foreign Institutional Investors (FIIs). Investor attention is also focused on the new tariffs announced by US President Donald Trump this week.
GIFT Nifty and Initial Indications
As of 6:40 AM on Monday, GIFT Nifty futures were trading at 22,359, up 79 points. This suggests a positive opening for the Indian market. The previous trading day, Friday, saw the Sensex close down 1,414 points (-1.9%) at 73,198 and the Nifty 50 close down 420 points (-1.9%) at 22,125.
Mixed Reactions in Asian Markets
Asian markets showed a slight uptick on Monday. Japan's Nikkei index rose 0.67%, while the Topix index increased by 0.75%. Australia's ASX 200 index was up 0.22%. However, the South Korean market was closed for a national holiday.
Meanwhile, investor caution persists regarding the new tariffs announced by US President Donald Trump this week. US Commerce Secretary Howard Lutnick stated on Sunday that the proposed 25% tariffs on Mexico and Canada are subject to revision, although a 10% additional tariff on goods imported from China has been implemented.
China's Ministry of Commerce bly opposed this US move and warned of retaliatory measures. A ministry spokesperson stated that if the US does not reverse its decision, China will take necessary steps to protect its legitimate economic interests.
US Market Gains
The US market saw gains on the previous trading day.
- S&P 500 up 1.59%
- Dow Jones up 1.39%
- Nasdaq up 1.63%
However, the Russia-Ukraine conflict caused slight dips throughout the day, but index recalibration and technical buying ultimately resulted in a positive close for the US market.
India's Economy and GDP Growth
India's economy achieved a GDP growth of 6.2% in the December quarter, exceeding the previous quarter's 5.6%. The Ministry of Statistics and Programme Implementation (MoSPI) projected a GDP growth of 6.5% for the fiscal year 2024-25, slightly higher than the January forecast of 6.4%.
However, the fluctuating GDP data and revised figures from the previous quarter have created confusion among economists.
Cautious Foreign Investors and Selling Pressure
The Indian market has recently experienced significant selling pressure.
- The P/E ratio of the BSE Sensex has dropped to 20.4x, its lowest level since May 2020.
- During the COVID-19 period, this figure reached 19.5x.
Foreign Portfolio Investors (FPIs) are also exercising caution due to the current market conditions. According to Jimit Modi, CEO of Samco Group, FPIs will remain hesitant to significantly invest in the Indian market until valuations reach attractive levels.
Market Recovery Potential?
The Indian market's trajectory this week will depend on several crucial factors:
Global market cues – The direction of the US market and the impact of the Asian market's uptick on the Indian market.
US-China trade war – New US tariffs on China could increase global market volatility.
February manufacturing PMI data – Data on the manufacturing sector in India and China will influence market trends.
FII activity – The participation of foreign investors can determine market direction.
Indian corporate earnings – Third-quarter corporate results could impact investor sentiment.
Strategies for Investors
Long-term investors – Can look for opportunities to buy quality companies during the downturn.
Short-term traders – Should trade cautiously, keeping in mind market fluctuations.
Focus on IT and FMCG sectors – These sectors are likely to maintain demand.
Caution in midcap and smallcap – Volatility may persist in these stocks after recent selling.
