Sensex, Nifty Set For Muted Start As Dollar And Yields Climb

Indian shares look set to open on a cautious note Wednesday after initial estimates from the government showed the Indian economy is set to grow at the slowest pace in 4 years in the fiscal year 2024-25.

Gross domestic product is expected to grow 6.4 percent in the financial year ending March 31, marking the slowest since the pandemic year 2020-21, following an 8.2 percent expansion in the previous fiscal.

The growth rate was also weaker than the government’s earlier projection of 6.5-7.0 percent.

Mixed global cues, a firmer dollar, surging U.S. bond yields, higher oil prices and anxiety ahead of the Q3 earnings season may also weigh on markets as the session progresses.

Analysts say that market sentiment will remain fragile until Donald Trump takes office as the next U.S. President on January 20.

Benchmark indexes Sensex and Nifty ended modestly higher on Tuesday, recovering from their worst performance in three months on worries about the HMPV Virus outbreak in the country.

The rupee logged its best single-day gain since late November to close 12 paise higher at 85.71 against the greenback amid dollar sales by foreign banks and RBI’s control measures.

Asian stocks were mixed this morning as fresh signs of a resilient U.S. economy clouded the outlook for U.S. rate cuts in 2025.

Treasuries were steady after falling across the curve in the previous session. The U.S. government’s monthly auction of 10-year notes drew the highest yield since 2007 after the release of upbeat U.S. service-sector activity and job openings data.

The dollar stood tall and the Japanese yen sagged close to levels that drew intervention last year, while gold was little changed below $2,650 per ounce on hawkish FOMC rate outlook.

Fed Bank of Atlanta President Raphael Bostic said on Tuesday that officials should be cautious with policy decisions, given uneven progress on lowering inflation.

Oil traded higher amid signs of reduced supplies from Russia and OPEC members and industry data showing another drop in U.S. inventories.

U.S. stocks fell overnight as inflation and interest rate concerns returned to the fore after the release of upbeat economic data.

The tech-heavy Nasdaq Composite slumped 1.9 percent, the S&P 500 lost 1.1 percent and the narrower Dow shed 0.4 percent as the yield on the benchmark ten-year note surged to an eight-month high.

U.S. service sector growth picked up in December, a measure of prices paid for inputs rose to near a two-year high, and job openings unexpectedly increased in November, prompting traders to push back their expectations on when the Fed can cut interest rates this year.

European stocks closed mostly higher on Tuesday despite data showing that inflation in the eurozone rose to its highest level in five months for December.

The pan European STOXX 600 gained 0.3 percent. The German DAX and France’s CAC 40 both rose by 0.6 percent while the U.K.’s FTSE 100 finished marginally lower.

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