Monday's robust US jobs report dashed prospects of a rate decrease by the Federal Reserve, extending the recent losing streak of benchmark market indices Sensex and Nifty to their fourth consecutive session. Fears of prolonged foreign outflows were heightened by the strong US statistics, which caused the dollar index to drop nearly to the 110 level and the rupee to plummet even further to a new low of 86.27. Concerns were also raised by crude prices reaching $81 per barrel, as BSE-listed stocks saw a Rs 5,13,691 decline in market capitalization within 30 minutes of trade.
At 76,617.34, the Sensex fell 761.57 points, or 0.98 percent. The Nifty was down 176.10 points, or 0.75 percent, at 23,255.40. For every stock that has risen thus far, three have fallen. 162 equities in all reached new 52-week lows.
Leading the Sensex losses with a 1.75 percent decline to Rs 238.75 was Zomato Ltd. Adani Ports, HDFC Bank, Axis Paints, Tech Mahindra, Tata Steel, ITC, and Mahindra & Mahindra all saw declines of more than 1%. Nestle India, Bharti Airtel, Bajaj Finserv, and Kotak Mahindra Bank all had a 1% drop.
"The several powerful headwinds will keep the market under pressure. The rate cut forecasts for 2025 have dropped to one due to the US's blowout jobs report, which showed that 2.56 lakh jobs were created in December compared to 1.65 lakh expected. The US economy doesn't require additional boost now that the jobless rate is 4.1%. For markets that were discounting further rate cuts this year, this positive economic data is turning out to be terrible news, according to V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
"The US economy's resilience bodes well for IT stocks, which have held up well even when the market has been down. Because of the favorable demand environment, pharmaceutical and healthcare equities will be less affected. Since the yield on US 10-year bonds is more than 4.7%, FIIs will keep selling, giving long-term investors the chance to purchase large-cap stocks at competitive prices, especially in the banking sector. There will be ongoing pressure on the larger market," according to Vijayakumar.
After the December quarter data, stock analysts reduced profits and target multiples, causing Avenue Supermarts Ltd (DMart) to drop 2.53% to Rs 3,592. According to analysts, DMart's margins would remain vulnerable due to intense competition and management's emphasis on market share before margins.
In addition to a 10% decline on Friday, Adani Wilmar saw a 7.75% decline to Rs 269 as the second day of the Adani Wilmar Ltd. offer for sale (OFS) began. Stock exchanges have been notified by Adani Wilmar of its plan to exercise the oversubscription option for 1,96,29,910 shares, or 1.51 percent of the total issued and paid-up share capital. This is in addition to 17,54,56,612 shares, which account for 13.50 percent of total issued and paid-up share capital and are included in the base offer size.
Stock market recovery ahead?
In its most recent strategy note, Emkay Global stated that the domestic stock market may stay poor until March, but that stability is likely from April onwards, with earnings expectations improving and FPI selling abating by then. Consumption is expected to recover beginning in the second half of 2025, it stated. The firm predicted a target of 25,000 for the Nifty in 2025, with small and midcap companies outperforming.
"We expect another year of moderate (6.5 percent) returns in the Nifty, with our conservative target of 25,000 at a moderate valuation of 21.1 times trailing P/E, or a 5% discount to the LTA. However, SMIDs should yield higher returns because they continue to excel on fundamentals. We are in the final stages of the earnings downgrade cycle, and we see little more than a 2-3 percent risk to the FY26 consensus Nifty EPS of Rs 1,251," Emkay said.
Technical Outlook
According to Akshay Chinchalkar, Head of Research at Axis Securities, the Nifty range between 23,177 and 23,355 would continue to play a role on the downside, with immediate resistance at 23,600. "Interestingly, even though the percentage of stocks in the Nifty above the 200-day average has fallen to 34, the 14-day momentum has not yet been oversold, which could indicate that more decline is likely. For the day, let's look for 23238 on the downside, which is key," he said.
