Benchmark stock market indices ended on a positive note on Wednesday, extending their upward momentum driven largely by strong gains in the banking sector stocks and speculation surrounding a potential rate cut in the upcoming Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) announcement scheduled for Friday. The market also witnessed an increase in investor optimism, fueled by hopes that easing rates might improve liquidity conditions and further support economic recovery.
The S&P BSE Sensex rose by 110.58 points, closing at 80,956.33, marking another significant rise, while the NSE Nifty50 added 10.30 points, ending the session at 24,467.45. This uptick was particularly driven by the positive performance in the banking, financial services, and real estate sectors, while investors also found opportunities in the defence sector following government approvals for major acquisition deals.
Vinod Nair, Head of Research at Geojit Financial Services, attributed the market’s positive trajectory to strong performances in key sectors, particularly banking. However, he also mentioned that volatility had emerged due to mixed sentiments in Asian markets, especially following developments in South Korea, which had caused some nervousness among global investors. Despite this, the domestic market appeared resilient, with banking stocks providing substantial support to the indices.
HDFC Life emerged as one of the top performers of the day, with a 2.52% increase in its stock price. It was followed by HDFC Bank, which saw a 1.67% rise, bolstered by expectations that a possible rate cut would lead to improved credit demand and lower borrowing costs. Bajaj Finserv also witnessed a strong performance, gaining 1.42%, while Apollo Hospitals rose by 1.38%. NTPC, too, added 1.37% to its value, benefiting from positive investor sentiment around the infrastructure and energy sectors.
On the flip side, Bharti Airtel was one of the major losers, falling by 2.28%, largely due to concerns about its competitive positioning in the telecom sector. CIPLA also saw a decline of 2.21%, while Bajaj Auto dropped by 1.77%, following mixed November sales results, which created doubts over the future growth prospects of the automobile sector. Tata Motors lost 1.63%, and Adani Ports saw a decline of 1.62%. These stocks faced headwinds due to broader market weakness and lower-than-expected corporate earnings in some cases.
"The broader indices showed strong performance, particularly the banking and financial sectors, which continued to lead the way," Nair explained. "At the same time, auto stocks came under pressure due to disappointing November sales figures, which impacted sentiment in that segment."
Looking ahead, Nair indicated that market sentiment could be swayed by external factors, such as the upcoming speech by the Federal Reserve Chair, which could offer insights into the U.S. central bank's policy direction. Recent minutes from the Federal Reserve meetings have shown a shift towards a more dovish stance, suggesting a continued easing of inflationary pressures, which could result in more rate cuts in the future. This outlook has led to speculation that global markets, including India, could see some benefit from these policy adjustments.
Technical analysts also weighed in on the market's outlook. VLA Ambala, Co-Founder of Stock Market Today, highlighted that the Nifty index tested the 24,500 mark during the session and formed a Doji candlestick pattern on the daily chart. This technical formation suggests that the market may be poised for further gains, with a positive outlook for mid-term and long-term investors. Ambala mentioned that the overall market sentiment remained optimistic, with healthy demand from institutional investors and a cautious but optimistic retail investor base.
A noteworthy development in the market came from the defence sector. Stocks of defence companies surged by nearly 5% in early trading hours after the Defence Acquisition Council approved an INR 21,772 crore acquisition proposal. This approval was seen as a significant boost for the defence sector, with key players like Mazagon Dock Shipbuilders and Garden Reach Shipbuilders leading the rally, gaining 5% each. Other companies in the sector, such as Bharat Electronics, Hindustan Aeronautics, and Bharat Dynamics, also saw strong gains, rising by 2-3%. This development is expected to strengthen the order books of these companies and could attract more investor interest in the sector, given the high spending by the Indian government on defence.
The top-performing sectors during the session included Nifty PSU Bank, which rose by 2.25%, and Nifty Realty, which gained 2.14%. Other major sectors such as Nifty Bank and Nifty Financial Services rose by 1.08% and 1.10%, respectively, indicating the overall strength in the financials sector. Nifty Private Bank also added 0.86%, reflecting investor confidence in the sector's growth potential. The Nifty Midsmall Healthcare index advanced 0.84%, with a number of healthcare stocks benefiting from positive sentiment surrounding the broader economy's recovery.
Meanwhile, the Nifty Oil & Gas sector declined by 0.29%, while Nifty FMCG fell by 0.73%, as investors began to shift focus from consumer staples to more cyclical sectors. The Nifty IT sector decreased by 0.44%, reflecting some profit-taking after the strong rally in tech stocks earlier in the year. Nifty Pharma saw a minor dip of 0.10%, while the Nifty Auto sector also lost 0.71%, largely due to the weakness in automobile sales as mentioned earlier.
Vaibhav Vidwani, a Research Analyst at Bonanza, offered an outlook on the broader market, stating that despite some declines in specific sectors, the overall market showed strong performance, particularly in public sector banks and the realty sector. "The market’s performance was largely supported by the banking sector and strong defence-related stocks, with healthy demand for real estate stocks. However, sectors like IT and FMCG faced headwinds, which caused some volatility," Vidwani said. He further emphasized that investors would now be closely monitoring upcoming economic data and the Reserve Bank of India's monetary policy meeting in December, as any changes in interest rates or policy guidance could significantly impact market sentiment.
Overall, Wednesday’s market performance reflected strong sectoral leadership, particularly in banking, defence, and real estate, but also highlighted some weaknesses in the automobile and consumer sectors. Investors are awaiting more clarity from the RBI’s policy decisions and other key global events that could influence sentiment in the coming days. The market appears poised for continued optimism, with sectors such as banking, real estate, and defence likely to remain in focus, while the performance of auto and FMCG stocks could continue to fluctuate based on broader macroeconomic conditions.
