Riding the Wave of Optimism: Indian Markets Defy Global Gloom on Q3 Hopes

Despite turbulent waters in the global market, Indian equities sailed smoothly on Thursday, January 4th, fuelled by a potent cocktail of positive domestic tailwinds and anticipation for robust corporate earnings. The benchmark indices, S&P BSE Sensex and Nifty 50, shrugged off mixed global cues to climb up to 0.7%, closing at 71,889 and 21,658 respectively. This upsurge extended beyond the frontline indices, with broader markets like Nifty Midcap 100 and Nifty Smallcap 100 witnessing gains exceeding 1% each.

The driving force behind this buoyancy was the unwavering faith in India’s underlying economic strength. With the October-December (Q3FY24) earnings season approaching, analysts are predicting a stellar performance from Indian companies, bolstering confidence in the market’s trajectory. This optimism stems from the expectation of healthy business growth across various sectors, driven by factors like sustained consumer spending, improving rural demand, and ongoing infrastructure development initiatives.

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Global Economic Concerns

However, this positive sentiment wasn’t simply homegrown. It also emerged as a counterpoint to the cautious atmosphere dominating the US market. Investors across the Atlantic felt the jitters after the release of the Federal Open Market Committee (FOMC) minutes, revealing a lingering ambiguity surrounding the timeline for rate cuts. While some market participants initially envisioned a possible cut in the near future, the minutes painted a different picture, suggesting a potential delay until the second half of 2024.

Ashutosh Sharma, Head of Forrester Research India, elaborated on this delay, attributing it to the persistence of macro-economic challenges. “US inflation remains stubbornly high, forcing the Fed to maintain its wait-and-see approach,” he explained. Nevertheless, Sharma anticipates a rate cut eventually, and when it materializes, it could trigger a domino effect, prompting the Reserve Bank of India (RBI) to follow suit. This would provide significant relief to export-oriented industries and technology companies within the Indian market.

Despite the lingering global uncertainties, Indian investors remained firm in their conviction. Shrey Jain, Founder and CEO of SAS Online – India’s Deep Discount Broker, remarked on the market’s resilience, highlighting the immediate resistance level for Nifty at 21,700 and the support zone between 21,400 and 21,450.

On this day, the spotlight shone brightly on the Nifty Realty index. It scaled a new peak of 836.45, led by a scintillating 20% surge in Sobha. Motilal Oswal Financial Services named Sobha as one of its top picks for 2024, igniting investor enthusiasm in the sector. Joining the celebratory rally were sectors like Financial Services and Oil & Gas, contributing to the overall upbeat mood. This positive sentiment even tamed the volatility gauge, India VIX, which cooled down by 4% to 13 levels after hovering around a 9-month high in the preceding sessions.

Banking and non-bank lenders also stole the show, propelled by positive updates from their December quarter business performance. Bajaj Finance witnessed a spectacular rise exceeding 4% after their asset under management (AUM) crossed the Rs 3 lakh crore mark for the first time ever. Similarly, IndusInd Bank shares touched a 52-week high on the back of a robust 20% on-year growth in Q3 advances.

Amidst this period of consolidation, market experts advise traders to adopt a cautious approach. “Sell on every rise and buy on every decline” seems to be the mantra for the moment, as it allows them to capitalize on market volatility while ensuring long-term exposure to India’s robust fundamentals. Compared to its emerging and developed market peers, India presents a compelling investment proposition, and the upcoming Q3 earnings season is poised to further validate this potential.

The Indian market’s defiant performance on January 4th paints a picture of unwavering optimism. Investors seem unfazed by global headwinds, their faith firmly anchored in the strong fundamentals of the domestic economy and the promise of stellar corporate earnings. While short-term fluctuations are inevitable, the long-term trajectory of the Indian market appears firmly upward, making it a beacon of hope amidst the global choppy waters.

 And as the Q3 earnings season unfolds, we can expect this optimism to reach a crescendo, further solidifying India’s position as a compelling investment destination in the eyes of the global financial community.

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