MARKET SUMMARY
Indian markets are expected to open on a flat-to-positive note, with GIFT Nifty futures indicating slight gains around 25,162. This builds on the previous day’s close, where the Sensex settled at 82,566 (a rise of 0.27%) and Nifty at 25,419 (up by 0.3%). Trading is likely to remain range-bound due to pre-Budget caution, with domestic buying countering Foreign Portfolio Investor (FPI) outflows and a weakening rupee at ₹91.82. Traders should monitor the Nifty’s key support and resistance levels at 25,200-25,500.
KEY DRIVERS
– Global cues are mixed, with US markets steady but Asian counterparts showing tepid activity. Firm oil prices are supporting energy plays, while rupee pressure remains due to FPI net sales of $27 billion in 2025.
– Domestic strength is evident as the Index of Industrial Production (IIP) growth rebounded to 6.68% in November, benefiting industrial sectors. Record auto sales in 2025 and an anticipated push in defense spending in the upcoming Budget are boosting sentiment.
– Earnings and flows show positive trends in broader markets, with midcap indices up by 0.18% and smallcap indices by 0.20%. Domestic Institutional Investors (DIIs) are supporting the market despite FPI exits, and coal stocks are rallying due to a ‘Critical Mineral’ designation for coking coal.
– Sector rotation is observed, with weekly gains led by metals (up 5.7%), PSU banks (up 4.98%), and autos (up 3.83%), indicating a shift away from lagging sectors like FMCG, which fell by 3.72%.
SECTORS TO WATCH
– Bullish sectors include metals, which rose 3% yesterday and 5.7% for the week, with Tata Steel up 4% and coal stocks like Coal India up 3% due to favorable policies. PSU banks and infrastructure are showing strong weekly momentum thanks to government capital expenditure tailwinds. Autos and oil/gas sectors also report record sales, with a weekly gain of 3.19%.
– Cautious sectors are healthcare, FMCG, and IT, which are down 0.96% and 3.72% for the week due to factors like sin tax and earnings misses.
EVENTS
The Union Budget is scheduled for this weekend. Key areas to watch include potential defense spending increases, updates on the fiscal deficit, which is pressured at 4.4% for FY26, and an IPO pipeline valued at ₹2.5 trillion. Additionally, key earnings reports from IT majors like Wipro and HCLTech are due, along with impacts from coking coal policy changes.
RISKS
– FPI outflows and the rupee at ₹91.82 may limit market gains if the Budget does not meet expectations regarding tax revenues.
– Global uncertainty persists, with conflicting signals from US growth and distribution in broader indices.
CLOSING NOTE
Prepare for a rotation led by metals. Stay agile, manage Budget-related risks, and consider targeting dips in PSU banks and autos for opportunistic trades.