Market faces volatility as GDP growth slows, vehicle sales dip & global signals are mixed

The market is under pressure today, as weaker-than-expected GDP growth in the second quarter has raised concerns. GDP growth was only 5.4%, below the 6.5% forecast. The GST collections have also been disappointing, growing by just 8.5% compared to the expected 11.5%. Additionally, retail vehicle sales in November have fallen by 15%, further dampening market sentiment. These factors have sparked worries that the market could face a significant downturn. The high volatility seen in recent days is continuing.

While global signals are positive, Asian markets are moving in different directions. The GIFT Nifty closed at 24,395 on Friday but dropped slightly to 24,350 this morning, suggesting the Indian market may open with a modest gain today.

Global markets

The US stock markets ended on a positive note on Friday, with the Dow Jones rising 188.59 points (0.42%) to close at 44,910.65, and the S&P 500 gaining 33.64 points (0.56%) to finish at 6032.38. The Nasdaq Composite gained 157.69 points (0.83%), closing at 19,218.17. Both the Dow and S&P 500 set record highs, while the Nasdaq rose by 6% in November. Small-cap stocks also performed well, with the Russell 2000 up by 10.8%. Companies like Nvidia led the gains.

US futures are down slightly this morning, with the Dow, S&P 500, and Nasdaq all showing minor declines.

The yield on the US 10-year Treasury bond has risen again to 4.178%, suggesting that the market is anticipating a potential interest rate cut by the Federal Reserve. There is now a 66% chance of a 0.25% rate reduction in December.

European markets also ended higher on Friday, although there is concern over the political crisis in France, which has caused the risk premium on French bonds to rise.

Asian markets are mixed today. Japan's Nikkei index dropped by 0.5%, while South Korea and Australia saw gains of 0.5%. China's market opened higher.

Indian market

The Indian stock market staged a strong relief rally on Friday, with major indices rising by around 1%. The Nifty rose 216.95 points (0.91%) to close at 24,131.10, and the Sensex gained 759.05 points (0.96%) to finish at 79,802.79. The Bank Nifty rose by 0.29%, and both the Midcap and Smallcap indices saw modest gains.

Despite foreign investors selling shares worth ₹4,383.55 crore on Friday, domestic funds and financial institutions bought stocks worth ₹5,723.34 crore, which helped support the market. The broader market saw more stocks rising than falling.

The second-quarter GDP growth figure released on Friday was much weaker than expected. While analysts had predicted growth of 6.5%, the actual growth rate was only 5.4%. As a result, analysts have downgraded their forecasts for the full year. Growth expectations for 2024-25 have been revised down to around 6%, from earlier projections above 7%. This slowdown in GDP growth could impact corporate earnings, leading to lower stock valuations.

Lower-than-expected GDP growth may also reduce government revenue, which could force a cut in planned capital expenditure. The target for reducing the fiscal deficit this year is 4.9% of GDP, but achieving this may require significant expenditure cuts, further limiting growth.

The GST collection in November grew by just 8.5%, falling short of the 11.5% target. Vehicle sales, which are typically strong during the festive season, showed a disappointing increase of only 6%, with some automakers reporting a decline. Maruti Suzuki’s sales grew by just 5%, while Tata’s and Mahindra’s sales increased by only 2% and 1%, respectively. Hyundai even saw a 2.4% drop in sales. Retail vehicle sales were reportedly 15% lower than expected.

Company updates

Several companies have made positive announcements:

Cochin Shipyard received a ₹1,000 crore contract for naval ship maintenance.

KEC International secured an international contract worth ₹1,000 crore, bringing its total contracts for the year to ₹17,300 crore.

Biocon’s biosimilar drug Ustekinumab received approval from the US FDA.

Rail Vikas Nigam Limited won a ₹643 crore contract.

Dixon Technologies signed a deal to manufacture Google Pixel smartphones, which could significantly boost its revenue.

A merger between Aster DM Healthcare and Quality Care will create the third-largest hospital chain in India, valued at ₹43,000 crore.

Shares of Adani Group companies surged on Friday. Adani Green Energy jumped 20.96%, and Adani Energy Solutions rose 13.44%. Other Adani stocks also saw smaller gains.

Gold update

Gold prices closed higher on Friday, reaching $2,650.10 an ounce, but have fallen slightly this morning. The price of gold in Kerala increased by ₹560 per ounce on Friday before dropping ₹80 on Saturday.

The US dollar continues to remain strong, closing at ₹84.49 on Friday. The dollar index fell slightly to 105.74 but has risen again this morning. There are concerns that the US dollar could strengthen further if Donald Trump becomes president, particularly due to his threats against BRICS countries over their moves to reduce reliance on the dollar.

Crude oil prices ended last week lower, with Brent crude falling to $71.84 a barrel. This morning, Brent crude has risen slightly to $72.07. Other energy commodities like WTI and UAE’s Murban crude also saw modest changes.

Industrial metals were mixed on Friday. Copper rose by 0.47%, closing at $8,891.85 per tonne. Aluminum fell by 0.20%, ending at $2,594.00 per tonne. Zinc gained 1.51%, tin rose by 3.62%, and lead increased by 0.47%. However, nickel saw a decline of 0.61%.

Cryptocurrencies have been volatile, with Bitcoin briefly reaching around $98,400 before falling below $97,000. As of this morning, it is hovering around $97,400, while Ether remains just below $3,700.

Market indicators

Sensex 30 79,802.79 +0.96%

Nifty50 2 4,131.10 +0.91%

Bank Nifty 52,055.60 +0.29%

Midcap 100 56,392.65 +0.18%

Smallcap 100 18,650.95 +0.75%

Dow Jones 44,910.65 +0.42%

S&P 6032.38 +0.56%

Nasdaq 19,218.17 +0.83%

Dollar ($) ₹84.49 +₹0.00

Dollar Index 105.74 -0.31

Gold (ounce) $2650.10 +$12.20

Gold (Pewter) ₹57,200 +₹480

Crude (Brent) Oil $71.84 -$01.44