Market Outlook - January 2025

Market Update

December began well for global markets amidst hope of the usual “Santa” rally. Indian equities too had a good start to the month. However, in line with the global trends, Indian markets also reacted, with the Nifty index declining by 2% for the month. Sector performance was mixed, as Healthcare led the gains with a 3.7% rise, followed by Realty (+3.4%) and Consumer Durables (+3.1%). In contrast, sectors such as Power, Metals, and PSUs faced sharp declines, losing 7%, 5.4%, and 5.2%, espectively, during the month. Key domestic developments included the Reserve Bank of India (RBI) holding the repo rate steady at 6.5% while reducing the Cash Reserve Ratio (CRR) by 50 basis points. Additionally, SEBI proposed new regulations aimed at enhancing retail participation in algorithmic trading.

On the investment front, Foreign Portfolio Investors (FPIs) were net buyers, purchasing $59 million in Indian equities by December 30. Domestic Institutional Investors (DIIs) were also active, acquiring $4 billion worth of stocks by the end of the year. This suggests continued confidence in the Indian market, despite the overall market volatility. Meanwhile, global markets saw mixed results: the US Dow Jones recorded a significant loss of 5.2%, while Brazil (-4.3%) and Australia (-3.3%) also experienced declines. On the positive side, markets in Japan (+4.4%), Taiwan (+3.5%), and Hong Kong (+3.3%) saw gains.

International economic developments included the US Federal Reserve cutting interest rates by 25 basis points, signalling a shift in its monetary policy stance. Meanwhile, Japan’s government approved a record fiscal budget of $732 billion, highlighting its commitment to economic stimulus. These global moves, along with domestic factors such as the RBI’s policy adjustments, contributed to shaping the investment landscape at the close of 2024.