Post by : Saif Rahman

On Friday, the stock market in India celebrated a much-needed recovery, with the Nifty 50 halting a four-day decline, fueled by encouraging signals from Asian markets and growing expectations for a U.S. Federal Reserve interest rate reduction in the upcoming year.

The Nifty 50 advanced by 0.58% to close at 25,966.4, while the BSE Sensex marked a 0.53% increase, ending at 84,929.36. Nevertheless, both indices experienced weekly declines of 0.3% and 0.4%, amidst ongoing worries over a declining rupee and capital outflows from foreign investors.

Out of the 16 major sectors, only six managed to finish the week in the green, while most mid-cap and small-cap shares held steady. Analysts forecast that increasing foreign investments and a stabilizing rupee could bolster market stability in the weeks ahead. Anita Gandhi, the head of institutional business at Arihant Capital Markets, remarked, “The worst appears to be behind us as foreign investors resume buying and the rupee gains strength. Markets should be mindful of any yen carry trade adjustments following the Bank of Japan's interest rate increase.”

Foreign investors had shown interest in Indian equities for two sessions leading up to Friday, and the rupee appreciated for a third consecutive day. Elsewhere, the Bank of Japan raised its interest rates to their highest in 30 years, signaling the possibility of further hikes. Meanwhile, reported U.S. inflation for November came in lower than expected, with consumer prices elevating 2.7% year-on-year. This development has encouraged speculation on the Federal Reserve lowering rates, thereby enhancing the appeal of emerging markets like India for global investors.

The prospect of diminishing U.S. interest rates typically prompts investors to shift their portfolios toward emerging markets, benefiting from declining Treasury yields and a weaker dollar. This trend notably contributed to an uptick of 0.7% in Asian markets on Friday.

Several companies witnessed substantial share price increases. Notably, Reliance Industries enjoyed a 1.3% gain following its acquisition of a majority stake in the heritage nutrition company Udhaiyam. Shriram Finance surged 3.7% to an all-time high, buoyed by Japan's MUFG announcing a $4.4 billion acquisition of a 20% stake in the financial firm. Groww skyrocketed by 11.6% owing to a favorable “buy” recommendation from Jefferies. Furthermore, ICICI Prudential Asset Management saw a robust opening, closing up by 19.4% after its $1.2 billion IPO launch earlier this week.

As market dynamics evolve, investors are expected to keep a close eye on global economic indicators, particularly from the U.S., alongside trends in the domestic currency and foreign portfolio investments to assess the trajectory of India’s markets in the near future.

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