Domestic markets are expected to open on a flat note on Wednesday. Gift Nifty at 25085 signals a flattish opening, Analysts say a lack of domestic cues will keep the market lacklustre, though the undertone remains bullish. Analysts expect the consolidation mode to continue. Signals from the Asian markets are negative following a mixed closing at the US stocks overnight.
Vikram Kasat, Head - Advisory, PL Capital - Prabhudas Lilladher, said: Investors are closely watching the upcoming US inflation data that may influence the Federal Reserve’s decision on interest rates later this month, with speculation about a potential rate cut. In Asia, markets were influenced by concerns over China’s economic health. Additionally, oil prices rose slightly due to potential disruptions.
However, experts believe a risk-on strategy will help Indian stocks in a consolidation phase.
Vinay Paharia, CIO, PGIM India Mutual Fund, said India’s economic growth continues to be one of the highest among the larger countries. Macro variables such as fiscal deficit, current account deficit and currency are in a goldilocks scenario. Despite a coalition set-up, the Government has continued with its thrust on public capex. Rising private capex should further accelerate the capex cycle. Liquidity remains strong as domestic inflows have far exceeded FII flows, providing a cushion to capital markets.
“We are seeing early but credible signs of a performance shift from low growth/ quality names to high growth and high-quality names from the start of this fiscal, accentuated post June 2024. After having underperformed in FY24, there is a favourable potential risk reward in a high-growth and high-quality basket of stocks. We also see valuations being frothy in certain segments of the market, wherein lies the dual risk of earnings as well as multiple correction. There could be further headwinds for stocks in the micro bubble segment of the market due to likely volatility related to events such as the upcoming US elections, rate-cut anticipation, heightened geopolitical tensions and state-level elections in India,” he said.
“We are primarily adhering to our time-tested philosophy of high-growth and high-quality investing, and are confident that this philosophy would yield healthy results,” he further said.