The week ending January 17, 2025, saw significant turbulence in the Indian equity markets. Both the Nifty 50 and Sensex fell by 1%, marking the second consecutive week of declines. This drop came on the heels of a sharper fall in the previous week when indices declined by 2.3-2.4%. This article provides an analytical deep dive into the factors influencing market performance, incorporating data trends, sectoral performances, and broader economic implications.
Data Summary
Key Performance Metrics of Indian Markets
| Metric | Week Ending Jan 10 | Week Ending Jan 17 | Change |
|---|---|---|---|
| Nifty 50 | -2.4% | -1.0% | ↑ 1.4% |
| Sensex | -2.3% | -1.0% | ↑ 1.3% |
| Total Returns Index | +0.0% | +1.1% | ↑ 1.1% |
The Nifty 50 and Sensex declines were largely driven by sectoral weakness and external economic pressures. However, the Total Returns Index, which tracks over 4,000 companies, posted a positive return of 1.1%, indicating resilience in broader markets.
Factors Influencing Market Movements
1. Foreign Portfolio Investor (FPI) Outflows
Foreign Portfolio Investors (FPIs) withdrew a net USD 2.2 billion from the Indian markets during the week, marking the sixth consecutive week of outflows. This aligns with the global trend of rising US Treasury yields, which have made American investments more attractive.
| Week Ending | FPI Equity Outflows | FPI Debt Inflows |
|---|---|---|
| Jan 10 | USD 3.1 billion | -USD 1.0 billion |
| Jan 17 | USD 2.2 billion | +USD 0.4 billion |
Domestic Institutional Investors (DIIs) countered the impact by injecting USD 2.9 billion into equities, stabilizing the market.
2. Corporate Earnings Weakness
Earnings from major IT and financial services companies disappointed investors, weighing heavily on the benchmark indices:
- HCL Technologies: Reported a 5.3% YoY increase in net PAT, but slower Q4 growth expectations led to a 9.4% weekly decline.
- Infosys: Posted a 3% YoY decline in net PAT, resulting in a 7.7% fall in weekly returns.
- Axis Bank: Despite a 3.8% rise in net PAT, the stock dropped 4.8% due to weak Q3 performance.
Conversely, Reliance Industries reported robust earnings, with an 11.7% YoY rise in consolidated net profits. The stock gained 4.9%, partially offsetting broader market losses.
Sectoral Performance: Winners and Losers
| Sector | Weekly Change (%) |
|---|---|
| Nifty Realty | -6.5 |
| Nifty Metal | -3.8 |
| Nifty Auto | -2.8 |
| Nifty Bank | -1.4 |
| Mining | +3.2 |
| Metals | +2.5 |
- Nifty Realty was the worst-performing sector, declining by 6.5%, primarily due to global volatility.
- Mining and Metals showed resilience, posting gains of 3.2% and 2.5%, respectively.
Currency and Commodities Market Overview
1. Indian Rupee Performance
The Indian Rupee (INR) weakened, crossing the critical Rs.86 per USD mark. The currency depreciated by 0.8% during the week, driven by rising US Treasury yields and higher crude oil prices.
| Currency | Weekly Change (%) | Average Rate |
|---|---|---|
| INR/USD | -0.8 | Rs.86.51/USD |
| INR/Euro | -0.2 | Rs.88.83/Euro |
| INR/JPY | -1.5 | Rs.0.5515/JPY |
2. Gold Prices
Gold continued its upward trajectory, averaging USD 2,689.2 per troy ounce, marking a 1.1% weekly gain. Domestically, prices rose by 1.7% to Rs.78,448.4 per 10 grams.
3. Crude Oil Prices
Crude oil prices surged past the USD 80 per barrel mark for the first time in five months, averaging USD 82.2 per barrel for the week. Key drivers included US sanctions on Russian oil and a drop in US crude inventories.
Bond Market Dynamics
The bond market reflected a mixed trend:
| Security Type | Weekly Yield Change | Average Yield (%) |
|---|---|---|
| 10-Year G-sec | +4 bps | 6.80 |
| 5-Year G-sec | -2 bps | 6.73 |
| 10-Year Corporate Bond | -41 bps | 7.17 |
While the benchmark 10-year G-sec yield rose, the yield on 10-year corporate bonds declined significantly by 41 basis points, reflecting investor demand for higher-grade securities.
Outlook for Indian Markets
The Indian equity market faces challenges in the form of:
- Persistent FPI outflows driven by rising US yields.
- Weak earnings from key sectors like IT and financial services.
- Currency depreciation and its inflationary implications.
However, robust DII activity and resilience in broader market indices suggest that mid and small-cap stocks may continue to outperform large-cap counterparts. Investors should remain cautious but optimistic, focusing on sectors like metals and mining that have shown resilience.
Disclaimer
This article is for informational purposes only and should not be considered financial advice. Investors are advised to consult a financial advisor before making any investment decisions.
By understanding these trends and factors, investors can better navigate the complexities of the current market environment. Stay tuned for more updates and insights!