Sensex, Nifty Volatile: What Is Driving Stock Market On Monday, December 2, And What To Expect?

Stock Market 2024: The Indian market witnessed a volatile trend with mild gains and downside in the early trade of Monday, December 2, 2024. The performance comes after India's GDP took a backseat and recorded the slowest growth rate in 2 years, to 5.4% in Q2FY25. The latest GDP growth missed the market's estimates of 6.5%, and RBI's target of 7% for the quarter. Experts believe the impact of GDP performance is likely to be minimal on the market, with the focus now shifted towards the upcoming RBI policy where a rate cut is expected despite inflationcrossing the central bank's upper tolerance limit of 6%.

Sensex, Nifty On Monday:

Sensex traded in the range of 79,881.51 to 79,308.95. In the early trade, the benchmark slipped by nearly 494 points, however, recovered its losses and traded around the 79,800 mark. Ultratech Cements, Maruti Suzuki, Sun Pharma, JSW Steel, and Tech Mahindra are top gainers. However, gains were capped by stocks like NTPC, IndusInd Bank, L&T, and Kotak Bank which emerged as top losers.

Nifty 50 traded marginally up to near the 24,148 zone. The 50-scrip index traded between 24,182.60 to 24,008.65. In the early trade, the index dipped as much as 122.5 points. India's volatility index is above 1.87%.

According to Dr V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, the Q2 GDP shocker of 5.4% will weigh on markets but the impact is unlikely to be big since part of the declining growth was factored in by the market after the disappointing Q2 results. So, a sharp cut in the market, if it happens, can be an opportunity to buy since the DIIs will continue to buy during dips.

Vijayakumar believes the question is: what to buy. Segments like pharma, telecom and digital companies, which are not impacted by the slowdown can be bought on declines.

"In the context of the growth slowdown, the RBI is likely to cut the CRR on 6th December. The MPC is unlikely to cut rates when CPI inflation is running at 6.2%. CRR cut will be positive for banks and, therefore, banking stocks are likely to be resilient," he added.

India's real GDP came in at 5.4% in Q2 of FY 2024-25 over the growth rate of 8.1% in Q2 of FY 2023-24. Despite sluggish growth observed in Manufacturing (2.2%) and Mining & Quarrying (-0.1%) sectors in Q2 of FY 2024-25, real GVA in H1 (April-September) has recorded a growth rate of 6.2%.

On the latest economic print, Madan Sabnavis, Chief Economist at Bank of Baroda said, Given the rather uncertain global environment and the possible impact on inflation and the fact that currently, inflation has been averaging close to 5.9% in the last two months, a status quo on the repo rate will be the logical outcome from the policy. There would be a change in RBI projections for both inflation and GDP as inflation has been higher so far than the RBI forecast for Q3 and GDP growth has come much below expectations in Q2. It would hence be of interest to see what the projections this time are. While liquidity is tight presently, any measure to augment the same will be indicative of the RBI view on the permanency of this situation. We believe this is transient, but would tighten once again in December when the advance tax payments are due."

What to expect from the market this week?

Pranay Aggarwal serves as the CEO and Director of Stoxkart said, we are starting the forthcoming week with conflicting events. The Maharashtra election results gave a clear mandate to the Mahayuti alliance, but it has shown uncertainty regarding the leadership pick of the Chief Minister. Adani stocks have mostly recovered from the rout in earlier week but a new concern emerged about the GDP slump. The GDP growth number has come down to 5.4%, compared to 8.1% in the corresponding quarter a year back.

Aggarwal added the candlestick pattern suggests the nearest resistance level at 24,350-24,360 for the index. Many traders will likely be hesitant to buy above this level, remembering past failures to break through this resistance. A breakout above this level could trigger a wave of buying, fueled by the fear of missing out (FOMO). As long as the index remains below 24,360, short-term traders may book profits on any bounce and wait for a fresh breakout. Holding on to positions for too long, hoping for further gains, can be detrimental if the market reverses its course.

In terms of global markets, Aggarwal said, global markets are grappling with anxieties stemming from geopolitical tensions and uncertainties surrounding the U.S. Fed's interest rate decisions. The possibility of changing global trade dynamics under President-elect Donald Trump, particularly due to the threat of U.S. tariffs, is further adding to the global market unease.

Though Nifty has shown strength in the last week, the medium-term trend remains weak. From its September high of around 26,277, the Nifty is still down almost 12%. Novice traders often confuse short-term and long-term trends, potentially leading them to make impulsive decisions during these consolidations. It is crucial to remember that the market is designed to exploit such mistakes. Traders should focus on managing positions with a pre-determined strategy, rather than trying to predict every short-term fluctuation, he said.