Market experts have indicated that the upcoming Q3 earnings season will play a crucial role in determining the future direction of the markets. Attention is expected to shift to expectations surrounding the Union Budget and the policy decisions of the Trump 2.0 administration in the coming months. Ajay Bagga, a veteran banking and market expert, highlighted that the inauguration of “Trump 2.0” will be the most significant global event of January and possibly of the year.

In a boost to market sentiment, Gaurang Shah, Head Investment Strategist at financial services firm Geojit, pointed to strong advance tax collections, a stable GST collection performance, and a positive outlook for some sectors in Q3. However, he also anticipated some profit-taking as the rally progresses.

India’s Goods and Services Tax (GST) collections in December reached Rs 1.76 lakh crore, reflecting a year-on-year growth of 7.3%. This pushed the total GST collection for the fiscal year 2024-25 to Rs 16.33 lakh crore, marking a 9.1% increase from the same period last year, when the figure stood at Rs 14.97 lakh crore.

The Indian stock market is experiencing its highest gains in two weeks, with significant contributions from the auto, tech, and financial services sectors, as noted by Kedia Advisory. Despite this, investor caution remains, especially with potential new tariff policies that may arise under Donald Trump’s presidency.

However, the Sensex still remains nearly 6,000 points below its all-time high of 85,978 points, and while 2024 saw both the Sensex and Nifty gaining 9-10%, it was a more modest year in comparison to the 16-17% rise in 2023. The market’s performance in 2022 was comparatively weaker, with only a 3% gain in both indices.

Challenges such as weak GDP growth, foreign fund outflows, rising food prices, and sluggish consumption dampened investor sentiment in 2024. Additionally, the Indian rupee is hovering near its all-time low, impacted by expectations of fewer rate cuts from the U.S. Federal Reserve, a widening trade deficit, and subdued economic growth seen in the first half of 2024-25.

As the market continues to ride this positive wave, all eyes are on the forthcoming corporate earnings and the unfolding global political landscape, which will likely influence the Indian stock market’s next moves.

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Monday’s session had already seen a modest recovery, which analysts attributed to typical market behavior following oversold positions in key index stocks. Ajit Mishra, SVP of Research at Religare Broking, emphasized the importance of adopting a cautious approach, saying, “Participants are advised to maintain a cautious stance with a negative bias on the index until clear signs of a rebound emerge. However, individual stocks continue to present opportunities on both sides. We reiterate our preference for the pharma and healthcare sectors for long positions, while other sectors are likely to see mixed trading trends.”

Key Market Levels

Market experts have highlighted resistance levels at 23,850-23,870, with a bearish gap noted between 24,000 and 24,150. On the downside, support is observed at 23,600-23,500, with a potential further drop to 23,350 if these levels are breached.

Global Influences and Sectoral Focus

Global markets also provided a sense of optimism, with major US indices closing higher on Monday. Both the Dow Jones Industrial Average and Nasdaq Composite extended their winning streak to three sessions, bolstered by strong performances from top-tier technology companies, referred to as the “Magnificent Seven.” These gains came amid reduced trading volumes due to the holiday season.

Asian markets mirrored this subdued activity, trading within narrow ranges as the region followed the upward momentum set by Wall Street.

Other Market Indicators

Gold prices remained steady as the holiday season approached, while the dollar strengthened on expectations of prolonged high-interest rates in the US. In domestic trading, Foreign Portfolio Investors (FPIs) recorded net sales of ₹168 crore, whereas Domestic Institutional Investors (DIIs) made net purchases amounting to ₹2,228 crore. Meanwhile, Foreign Institutional Investors (FII) increased their net short position to ₹1.56 lakh crore.

As the market navigates through global and domestic cues, cautious optimism continues to dominate trading sentiments. Sectoral opportunities, particularly in pharma and healthcare, are likely to be the focus for long-term investors, even as broader market indices face resistance.

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