Market Set for Flat to Negative Opening Amid Mixed Global Stock Performance
The market is expected to open on a flat to negative note on Monday, following mixed global stock trends. Analysts predict subdued activity during the shortened trading week, with a focus on key state elections and upcoming economic events.
Nifty
Gift Nifty indicates a flat to negative start for Nifty futures on Monday, with analysts expecting subdued market activity throughout the shortened trading week due to the Maharashtra state election closure on Wednesday.
While the market is expected to open weak, analysts anticipate a potential recovery later in the day as Foreign Portfolio Investors (FPI) may reduce their selling pressure.
CLSA, in its latest update, stated that it is reversing its earlier tactical shift from India to China, initially made in October. The brokerage now plans to reallocate, becoming 20% overweight on India after reducing its India exposure to 10%. It also highlighted that India remains less exposed to the potential impacts of Trump’s trade policies compared to other regions, and it may offer forex stability in a stronger dollar environment.
Dr Vikas Gupta, CEO and Chief Investment Strategist at OmniScience Capital explained that India’s political focus is now shifting to key state elections in Maharashtra, Jharkhand, and Delhi, alongside anticipation for the Union Budget 2025. He also pointed out that India's equity market has corrected by 9.5% from its recent peaks due to slowing urban consumption, especially in large FMCG segments, muted demand in autos, utilities, and staples, and continued FII outflows.
Gupta emphasised that the FII selling is part of a global trend linked to the US elections rather than being India-specific.
Currently, Nifty futures at Gift City stand at 23,510, slightly down from Thursday’s close of 23,601.70.
Vipul Bhowar, Senior Director of Listed Investments at Waterfield Advisors, attributed the FII selling to several factors, including weak earnings, high valuations compared to other markets, and rising US bond yields. However, he noted that some of the selling is being offset by strong buying activity in primary markets through large IPOs like Swiggy and Hyundai. Bhowar believes that FII selling will likely ease as the calendar year draws to a close, with fresh investments expected once there’s greater clarity on Trump’s policy direction.
Bhowar also highlighted that FPIs have been shifting their focus from mature sectors to high-growth businesses, particularly in capital markets and healthcare.
Despite FII holdings declining by just 2.5% since September, Gupta observed a cautious sentiment in the market, with FII outflows being a global phenomenon. He noted that while developed and emerging markets have seen declines between 3% and 10%, India has corrected by around 9% from its recent peak, while China has dropped 20%. Strong domestic mutual fund inflows indicate resilience among Indian investors and provide stability amid volatility.
Gupta also mentioned that if FII outflows subside, even without new inflows, domestic inflows could trigger a market upswing. Furthermore, as clarity emerges around Trump administration policies, FII inflows are expected to return to both developed and emerging markets.
Motilal Oswal Financial Research highlighted weaknesses in the corporate earnings scorecard for Q2-FY25, with consumption showing the most significant weakness and some stress in BFSI. The report also cited moderation in earnings due to lower government spending. However, it expects a recovery in H2-FY25, aided by a revival in government spending, a good Kharif crop, and improving rural demand.
The Nifty FY25 EPS has been revised down by 1% following a 4% cut in the 2QFY25 preview. The Nifty’s EPS growth for FY25 has now been reduced to just 5%, the weakest since FY20. Despite a 10% correction, the broader market continues to trade at high valuations (NSE Midcap 100 at ~29x forward P/E). The research firm remains overweight (OW) on IT, Healthcare, BFSI, Consumer Discretionary, Industrials, and Real Estate, while underweight (UW) on Metals, Energy, and Automobiles.
Meanwhile, equity markets across the Asia-Pacific region are mixed, with Japan’s market down by 0.6%, Hong Kong up by 0.30%, Korea’s Kospi surging over 2%, and Taiwan slipping 0.50%.
