Investors shift towards multi-asset strategy in volatile week for Indian stock markets
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It was a volatile week for the Indian stock markets as investors shifted towards a multi-asset strategy amid geo-political uncertainties, with Donald Trump’s impending return as the 47th US President.
The domestic benchmark indices concluded the week with a pessimistic note as a sell-on-rally sentiment prevails in the market due to a strong US dollar and high valuation, according to market experts.
After a strong pullback, benchmark indices took a breather on Friday, with the Nifty index closing on a negative note at 24,005. The volatility index, India VIX, cooled by 1.43 per cent to 13.54, reflecting reduced market volatility.
“As long as the index maintains above 23,900, a buy-on-dips strategy is recommended for Nifty,” said Hrishikesh Yedve of Asit C Mehta Investment Interrmediates Ltd.
Sensex ended at 79,223.11, down by 720.60 points or 0.90 per cent, on Friday.
Nifty Bank ended at 50,988.8, down by 616.75 points, or 1.20 per cent. The Nifty Midcap 100 index closed at 57,931.05 after declining 177.15 points, or 0.30 per cent, while the Nifty Smallcap 100 index closed at 19,033.70 after declining 46.65 points, or 0.24 per cent.
The auto sector outperformed other indices, driven by robust December sales that defied the usual subdued demand.
Mid and small caps exhibited a tepid recovery, while large caps lagged the former. Amid persistent foreign institutional investor (FII) outflows, domestic institutional investors (DIIs) maintained their optimistic stance.
Despite earlier optimism regarding potential earnings growth for the upcoming quarter, investors remain cautious heading into the New Year.
Uncertainty surrounding Trump's economic policies and high valuations may impact the stock market in the short term, particularly in emerging markets, according to experts.
Looking ahead, significant market attention is expected for the upcoming Q3 results, with an anticipated improvement on a QoQ basis. Further, the investors are likely to align their portfolios based on pre-budget expectations. The key data points such as the FOMC minutes, US non-farm payroll and unemployment rate will influence market sentiment, said Vinod Nair, Head of Research, Geojit Financial Services.
