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Indian markets ended lackluster session with decent gains on Tuesday, as Reliance Industries, FMCG, and financials gained ground. Today, domestic markets are likely to make gap-up opening as global cues continue to remain encouraging. Traders will be taking encouragement as the finance ministry said tax reforms, a sharp hike in capital spending without weakening fiscal discipline and robust public digital infrastructure are among a raft of steps initiated by the Modi government that would help India emerge as a $5-trillion economy. Some support will come as International Monetary Fund’s Executive Board said Indian economy is likely to log 6.3% growth in FY24 and FY25 on the back of macroeconomic and financial stability. Besides, Parliament gave its approval for a net additional spending of Rs 58,378 crore in the current fiscal ending March 2024, with a large chunk allocated to MGNREGA and fertiliser subsidies. The gross additional spending would be more than Rs 1.29 lakh crore, out of which Rs 70,968 crore would be matched by savings and receipts. However, foreign fund outflows likely to dent sentiments. Provisional data from the National Stock Exchange (NSE) showed that foreign institutional investors (FIIs) net sold shares worth Rs 601.52 crore on December 19. There may be some cautiousness as Union Agriculture Minister Arjun Munda said share of agriculture in India's GDP declined to 15 per cent last fiscal year from 35 per cent in 1990-91 due to rapid growth in the industrial and service sector. The decline is brought out not by the decline in agricultural GVA but a rapid expansion in industrial and service sector GVA. Traders may be concerned with a private report that investments by private equity and venture capital funds plummeted to a 43-month low of $1.6 billion in November. There will be some reaction in banking and NBFCs stocks after India's central bank asked entities regulated by it, including banks and non bank finance companies (NBFCs), to stay away from investing in alternate investment funds which have investments in existing and recent borrowers. Aviation industry stocks will be in focus as credit rating agency ICRA said the Indian aviation industry is expecting to show a year-on-year (Y-o-Y) revenue growth of 15-20 per cent and 10-15 per cent, respectively, in financial years 24 (FY24) and 25 (FY25). Meanwhile, DOMS and India Shelter Home will be in focus as they mark their debut on the bourses.

The US markets ended higher on Tuesday as last week's dovish policy pivot from the Federal Reserve continued to reverberate and investors looked ahead to crucial inflation data. Asian markets are trading mostly in green on Wednesday with Japan stocks extending gains to another session after the country’s central bank left its ultra-loose monetary policy unchanged at its final meeting this year.

Back home, Indian equity benchmarks scaled new record closing highs and managed to close with modest gains after a volatile session on Tuesday led by buying in Energy, FMCG and PSU stocks. Markets made a slightly positive start but soon gave up all the early gains and traded lower in the first half as traders turned cautious with provisional data from the National Stock Exchange (NSE) showing that foreign institutional investors (FIIs) net sold shares worth Rs 33.51 crore on December 18. Some concern also came as economic think tank the Global Trade Research Initiative (GTRI) in its latest report stated that India's exports worth $775 million to the UK may be impacted due to Britain's decision to introduce carbon tax on products such as iron and steel, aluminium, fertiliser and cement, from 2027.  The UK government on December 18 decided to implement its Carbon Border Adjustment Mechanism (CBAM) starting 2027. However, buying in select heavyweights cut all the losses as the day progressed. Traders took some support with report that domestic rating agency Icra revised its FY24 GDP growth forecast to 6.5 per cent from 6.2 per cent earlier. It said the revision is being done because Icra feels the deflation in commodity prices will be sustained and there are expectations of better growth in the October-December period than previous estimates. Some optimism also came with International Monetary Fund’s (IMF) statement that India's robust economic growth, propelled by key reforms in digitisation and infrastructure, positions it as a leading global contributor, accounting for over 16 per cent of the world's growth. Traders also took note of report that India and UK have wrapped up the 13th round of negotiations on the Free Trade Agreement after four months of in-person and virtual meetings and the next round will be held in January. These negotiations (in 13th round) focused on complex issues including goods, services and investment. Finally, the BSE Sensex rose 122.10 points or 0.17% to 71,437.19 and the CNX Nifty was up by 34.45 points or 0.16% to 21,453.10.

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