Indian stock market maintains positive outlook as RBI turns more realistic

Amid a positive turnaround from foreign institutional investors (FIIs) to India, the Indian stock market maintained a positive outlook throughout the week as the core sector output in October and stability in service PMI data showed signs of recovery, experts said on Saturday. FIIs returning to India in expectation of a dovish monetary policy by the Reserve Bank of India (RBI) also supported the sentiment.

“RBI turns more realistic with a revision on its growth forecast for FY25. While boosting liquidity in the financial system by reducing CRR by 50 bps, RBI reiterates that maintaining macroeconomic stability remains crucial,” said Vinod Nair, Head of Research, Geojit Financial Services.

The market closed flat on Friday. Sensex settled at 81,709.12 while Nifty ended at 24,677.80. Nifty is holding steady above the crucial 24,650 support level.
“The primary trend remains positive, as Nifty trades near the upper band of the Donchian Channel, which is trending higher — a signal of potential bullish momentum,” said Om Mehra, Technical Analyst, SAMCO Securities.

Additionally, India's volatility index (VIX) remains subdued, hovering below the 15 mark, suggesting a contraction in volatility and reduced fear in the market.

Investors are now accumulating the momentum stocks as the expected pick-up in the government capex may provide some impetus to infra, capital goods, realty, cement, and metal industries in the second half this fiscal.

PSU banks outperformed amid a liquidity boost by RBI. The outlook for the February monetary policy meeting also turned positive as inflation is likely to moderate in Q4, supported by seasonal corrections in vegetable prices, kharif harvest arrivals, and anticipated rabi output, said market watchers.

Inflation, though slightly higher, may continue to remain under control. The factors like soil moisture content, reservoir levels, seasonal winter vegetable price correction, suggests that food inflation may show declining trend which has been point of bother, said Siddarth Bhamre, Head, Institutional Research at Asit C Mehta Investment Interrmediates Ltd.

For the week ahead, market direction will be influenced by the release of US payroll and US CPI inflation data, which will give some insights into the Fed's December meeting.