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Market watch

• The Indian stock market opened muted due to profit-booking and foreign outflows, with investors shifting funds to China.
• Bajaj Finance rose 2.5% post-results, indicating potential earnings growth, while Zomato fell 4.3% after missing Q2 profit estimates.
• Global cues like the U.S. presidential election and oil price fluctuations influenced the market, leading to a cautious trading day.
• Despite foreign outflows and global uncertainties, analysts note India's strong fundamentals and advise investors to adopt a cautious yet vigilant approach.

The Indian stock market opened on a muted note on Wednesday, with the NSE Nifty 50 slightly rising to 24,487.2 points and the S&P BSE Sensex inching up to 80,304 points by 9:24 a.m. IST. The market's performance was influenced by profit-booking due to lacklustre corporate earnings and continued foreign outflows, with investors moving funds to China following stimulus measures there. This shift in investment sentiment was significant as it contributed to a bearish trend, despite some recovery attempts.

The top gainer on the Nifty 50 was Bajaj Finance, which rose 2.5% post-results as its management indicated that credit costs had peaked in the first half of fiscal 2025, signaling a potential rebound in earnings growth. This was significant as it showed optimism in the financial sector despite broader market concerns. On the other hand, Zomato fell 4.3% after the food delivery firm missed the second-quarter profit estimates as expansion costs squeezed margins.

Global Factors and Market Sentiment

The Indian stock market was also influenced by global cues such as the uncertainty ahead of the U.S. presidential election and the potential impact of oil price fluctuations, influenced by geopolitical tensions. The combination of these factors led to a mixed global market outlook, which in turn affected Indian indices, making investors more risk-averse and contributing to a muted opening and cautious trading day.

Investors were expected to closely monitor key market triggers in the following week, including the release of Q2 results for fiscal 2024-25, foreign fund outflows, and global cues. The expectations were mixed due to concerns over foreign institutional investors (FIIs) continuing to pull out funds from India, moving to markets like China. The focus on Q2 earnings was crucial as they would indicate the health of corporate India and potentially influence investor sentiment.

Analysts' Take and Investor Strategy

Market analysts acknowledged the Indian economy's resilience, noting that despite the foreign outflows and global uncertainties, India had strong fundamentals, including a comfortable foreign exchange reserve, a manageable current account deficit, and a lower external debt to GDP ratio. They highlighted that while the Indian market faced headwinds from FII outflows and global economic concerns, the economy was better positioned to handle these challenges compared to some other nations.

For investors, the general recommendation was to adopt a cautious yet vigilant approach. Analysts advised monitoring global events closely and staying updated on domestic economic indicators. They suggested that investors should consider taking a measured risk strategy, potentially looking for opportunities in short-term volatility while keeping an eye on fundamentally strong stocks or sectors. The emphasis was on diversification and patience, with the understanding that while the current environment might be challenging, it could also present buying opportunities for long-term investors.

Market Performance and Outlook

The main factors that led to the mixed performance of the Indian stock market during the period covered were persistent foreign outflows as investors shifted to markets like China due to stimulus measures, indicating a loss of confidence in Indian equities in the short term. Lacklustre corporate earnings, with some companies showing signs of recovery but not enough to offset broader concerns. Global uncertainties, such as the Israel-Iran conflict and the US-China dynamic, influenced investor sentiment. Global interest rate decisions and stimulus measures impacted capital flows and market expectations. Domestic factors like retail inflation, which influenced expectations of monetary policy, and the performance of key sectors like banking and technology.

This mixed performance suggests a near-term outlook that is cautious and volatile. The market is likely to be sensitive to global cues and domestic economic indicators. Investors are advised to be selective and adopt a defensive strategy, considering the potential for continued volatility due to ongoing global and domestic uncertainties. The market's resilience, as mentioned by some analysts, indicates that while challenges are present, there could be opportunities for investors who can navigate the volatility with a long-term perspective.