Weekly Market Wrap-Up

1. Market Moves?

Indian market Summary?

On the radar: Union Budget & Donal Trump’s Inauguration?

Indian equity markets demonstrated resilience in the first trading week of 2025, closing with gains of approximately a percent. The positive momentum was primarily driven by strategic year-end portfolio rebalancing by foreign institutional investors and sustained inflows into domestic mutual funds.?

The market sentiment further improved on the back of strengthening domestic macroeconomic indicators and favourable global market cues.?

The ongoing depreciation of the Indian Rupee against major currencies remained a concern for investors, leading to volatility across trading sessions. This volatility was evident as the major indices closed lower in three out of the five trading sessions during the week.

Looking ahead, President-elect Donald Trump's pre-inauguration rally scheduled for January 19, 2025, in Washington is a major event to watch out for.? The rally is expected to outline his administration's key policy priorities, including significant changes to immigration policies, expansion of domestic oil production, and the implementation of new tariff measures. Market analysts are particularly focused on how these policies might impact the US dollar's strength and potentially influence foreign investment flows into emerging markets like India.

On the domestic front, there is growing anticipation around the upcoming Union Budget for fiscal year 2025-26, scheduled to be presented on February 1. Market participants are optimistic about the possibility of growth-oriented initiatives and policy measures that could provide further impetus to the Indian economy. The budget expectations are centred around potential reforms and fiscal measures that could boost various sectors and maintain India's growth momentum.

Global market summary - USD strength driving US markets flows?

Major US stock indexes were mixed during the holiday-shortened week, although broad gains on Friday helped indexes finish off their worst levels.? Underperformance at the beginning of the week was partially attributable to some profit-taking heading into the end of the year. Despite the year-end slump for U.S. equities, 2024 marked the second straight annual gain of over 20% for the S&P 500 Index and a two-year gain of 53%, the best two-year performance since 1997 and 1998. The Nasdaq Composite also finished the year up over 20% for the sixth time in the past eight years.

The U.S. dollar has surged to a two-week high, driven by expectations of stronger economic growth compared to other nations. This strength is underpinned by robust consumer spending and a resilient labour market, surpassing economic forecasts. The Federal Reserve's cautious approach to interest rate cuts has kept rates relatively high, further bolstering the dollar's value in the international market.?

President-elect Donald Trump will hold a rally in Washington on January 19, one day before his second inauguration, to preview his key policies, including immigration, domestic oil production, and sweeping tariffs

US Crude oil futures rose above $74/barrel during the week fueled by cold weather in Europe and the US, coupled with optimism about Chinese economic stimulus measures. This rally pushed prices to a two-month high.

2. Economic Data & Indicators?

US

• Pending Home Sales in the United States increased 6.90 percent in November of 2024 over the same month in the previous year.
• The S&P CoreLogic Case-Shiller 20-city home price index in the US went up 4.2% year-on-year in October 2024, following a 4.6% increase in the previous month.
• Construction spending in the United States stalled month-over-month to a seasonally adjusted annual rate of $2,153 billion in November 2024, following an upwardly revised 0.5% increase in October.

UK/Eurozone/Germany

• The HCOB Eurozone Manufacturing PMI was at 45.1 in December of 2024, edging lower from 45.2 in the previous month. The HCOB Germany Manufacturing PMI was confirmed at 42.5 in December 2024, down from readings of 43 in both October and November.

• Germany's seasonally adjusted unemployment rate remained at 6.1% in December 2024, near its highest level since February 2021. The number of unemployed individuals rose by 10,000 to 2.869 million.

Japan/China

• The au Jibun Bank Japan Manufacturing PMI stood at 49.6 in December 2024, slightly above the flash estimate of 49.5 and up from 49.0 in November.

• China's official NBS Manufacturing PMI unexpectedly fell to 50.1 in December 2024 from November’s seven-month high and market estimates of 50.3.
• China's official NBS Non-Manufacturing PMI rose to 52.2 in December 2024 from 50.0 in the previous month, pointing to the highest figure since March
• The Caixin China General Manufacturing PMI edged down to 50.5 in December 2024 from November's 5-month high of 51.5.

3. In the limelight:? Household Consumption Expenditure Survey: 2023-24?

• The average monthly per capita consumption expenditure (MPCE) in rural and urban India in 2023-24 is estimated to be Rs. 4,122 and Rs. 6,996, respectively.?
• The gap in MPCE between urban and rural areas has narrowed down to 70% in 2023-24 from 84% in 2012.
• The average MPCE increase in 2023-24 from 2022-23 was highest for the bottom 5% to 10% of India’s population in both rural and urban areas.

4. Market Outlook – Bulls’ resolve will be tested!

The stock market's turbulent movements are likely to challenge even seasoned traders. We advise investors to prepare for continued volatility in upcoming trading sessions.

President-elect Trump's January 19 pre-inauguration rally is expected to unveil major policy shifts in immigration, oil production, and trade tariffs, with potential implications for global currency markets and investment flows. Meanwhile, India's upcoming Union Budget presentation on February 1 has generated optimism among market participants who anticipate growth-focused reforms and fiscal measures to sustain economic momentum.?

Indian equity markets demonstrated resilience in the first trading week of 2025, minorly built on its gains of the last week by rising a percent. Nifty ran into a stiff resistance around 24200 last week and bulls resolve to break past the resistance zone of 24200-24400 will be severely tested this week.?