The Indian stock market is poised to wrap up 2024 on a positive trajectory, even as it navigates several domestic and global challenges. Last week, the market saw a phase of consolidation marked by intraday volatility, largely influenced by foreign fund outflows and subdued global cues amidst the year-end festive season. This cautious trading environment muted the recovery but did not dampen the market’s overall optimism as it prepares to usher in the new calendar year 2025.

The Week That Was

Domestic equity benchmarks, the Nifty 50 and the BSE Sensex, provided some relief to investors last week. The Nifty 50 gained nearly 1%, closing at 23,813, while the Sensex rose 0.84%, settling at 78,699. These gains came after a sharp 5% decline in the preceding week-the steepest drop in 30 months-triggered by the US Federal Reserve’s projection of fewer rate cuts in 2025.

The recovery was driven by auto stocks, which rebounded as attractive valuations enticed buyers following earlier sharp declines. Sectoral performance was mixed: pharma, auto, and FMCG sectors displayed resilience, while metals lagged behind. Broader indices, including midcap and smallcap segments, remained flat, reflecting cautious investor participation.

A notable improvement in sentiment was observed in the India VIX, a volatility gauge, which dropped sharply by 12%. This decline signals reduced market fear and hints at a potential uptick in investor confidence. However, trading volumes remained low, with an average of 180 million shares traded daily on the Nifty 50 last week, significantly below the 300-million-share average for the year.

Key Market Triggers Next Week

As the year closes, investors will focus on several crucial market triggers that could set the tone for the early weeks of 2025.

Corporate Earnings & Q3FY25 Updates

The upcoming quarter will begin with the first set of corporate earnings updates for Q3FY25. Investors are likely to closely scrutinize these figures, which will offer insights into how companies fared during the festive season and in the face of global economic challenges.

Auto Sales Data

The release of auto sales data for December will be another significant factor influencing market sentiment. Strong numbers could provide a further boost to auto stocks, which have already shown resilience in recent sessions.

IPO Action

The primary market will witness heightened activity with four new IPOs and six listings slated this week. Notably, Indo Farm Equipment’s IPO will open for subscription in the mainboard segment on December 31. Meanwhile, three SME IPOs will open for bidding between December 30 and January 3.

In terms of listings, shares of Ventive Hospitality, Senores Pharmaceuticals, and Carraro India are set to debut on December 30, while Unimech Aerospace and Manufacturing will follow on December 31. Additionally, two SME companies will make their debut on either the BSE SME or NSE SME platforms.

FII & DII Activity

Foreign institutional investors (FIIs) remained net sellers last week, offloading Rs 6,322 crore in the cash market. However, domestic institutional investors (DIIs) countered this trend, injecting Rs 10,927 crore. For December, foreign portfolio investors (FPIs) have invested Rs 16,675 crore in Indian equities as of December 27.

Global Cues

Global factors will continue to play a pivotal role in shaping market sentiment. Key economic indicators such as Manufacturing PMI data from China and the US, along with US jobless claims, are expected to drive market movements. Additionally, the performance of the US dollar index (DXY) and the 10-year bond yield will be closely monitored, as these indicators impact emerging markets like India.

Crude Oil Prices

Oil prices recorded modest gains last week, buoyed by optimism about China’s economic growth and a larger-than-expected drawdown in US crude inventories. Brent crude futures rose 1.2% to settle at $74.17 per barrel, while US West Texas Intermediate crude futures climbed 1.4% to $70.60 per barrel. On the domestic front, crude oil futures on the Multi Commodity Exchange (MCX) edged up 0.17% to Rs 6,045 per barrel.

Corporate Actions

The week will also see several companies’ shares trading ex-dividend, ex-bonus, or ex-split. For instance, Redtape shares will trade ex-dividend, while KPI Energy shares will trade ex-bonus. These corporate actions could trigger stock-specific movements, attracting investor interest.

Broader Market Outlook

Despite the challenges of 2024, the Indian stock market has displayed resilience, supported by a strong domestic economy and consistent inflows from domestic institutional investors. The subdued trading volume in recent sessions is likely a temporary effect of the holiday season, with activity expected to pick up as the quarterly earnings season begins in January.

Analysts expect the market to remain range-bound in the near term, with a cautious tone until more clarity emerges from corporate earnings and global economic data. However, the sharp decline in India VIX indicates that volatility may remain subdued, providing a relatively stable environment for investors.

Global & Domestic Risks

While the outlook is broadly positive, certain risks could weigh on market sentiment. On the global front, any uptick in US bond yields or the dollar index could pressure emerging markets, including India. Domestically, persistent foreign fund outflows and weak macroeconomic data could dampen investor confidence.