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Indian equity markets experienced a significant rebound, with the Sensex climbing over 1,500 points to approach 82,000, while the Nifty surpassed 24,750. This surge was driven by strong buying in heavyweight IT stocks and positive global sentiment following comments from the US Federal Reserve Chairman about the resilience of the US economy. Additionally, robust inflows from foreign institutional investors and anticipation of the Reserve Bank of India's upcoming monetary policy decision bolstered market strength.
Nomura maintains its prediction that the Reserve Bank of India will cut interest rates by 25 basis points, despite concerns over rupee weakness and rising inflation. While retail inflation has exceeded the RBI's tolerance limit, Nomura highlights that price increases are concentrated in specific items, with overall inflation remaining subdued.
Rising costs have pushed many smaller intermediaries out of the booming Russian oil trade with India, leaving three major trading houses to dominate the market. Despite the challenges, Russian seaborne oil shipments to India have reached near-record highs, surpassing those to China, with India now accounting for over a third of its crude imports. This consolidation has enabled Russia to sell oil at smaller discounts, maintaining its competitive edge against U.S. and Middle Eastern grades.
Cognac and Champagne producers are ramping up shipments to the US in anticipation of potential tariffs under President-elect Donald Trump. LVMH's Hennessy has already increased its consignments, while Moët & Chandon plans to follow suit, as industry insiders reveal concerns over future trade policies.
Nomura has maintained an 'overweight' stance on Indian equities, citing a structurally positive outlook despite near-term macroeconomic risks. The brokerage highlights the resilience of domestic equity flows and robust earnings growth prospects for 2025, while acknowledging potential valuation vulnerabilities amid global uncertainties.
Foreign investors are returning to India's sovereign bonds, particularly those eligible for global index inclusion, as local debt rises amid expectations of increased liquidity from the central bank. In just four days this month, global funds invested 64.72 billion rupees ($764 million) in Fully Accessible Route bonds, surpassing November's outflow of 51.87 billion rupees, marking a significant rebound since India's inclusion in JPMorgan Chase's index in June.
DP World Ltd., a UAE-based port operator, is set to expand its operations in India to address trade bottlenecks. The company, which primarily manages container ports, is exploring ways to expedite goods delivery amid challenges such as cargo threats in the Red Sea and Suez Canal, pandemic repercussions, and tariff risks.
Nomura maintains its prediction that the Reserve Bank of India will cut interest rates by 25 basis points, despite rising inflation and a weakening rupee. The investment bank argues that concerns over economic growth outweigh inflation worries, noting that high prices are limited to specific items like food, while broader inflation remains subdued.
Economists are expressing caution regarding growth in Hong Kong and Singapore for the upcoming year, as Donald Trump's potential return to the White House could lead to increased tariffs, further impacting China's economy. Recent estimates indicate a reduction in quarterly outlooks for Hong Kong through the first half of 2025 by at least 0.5 percentage points, with the yearly growth forecast adjusted down to 2.2% from 2.6%, according to a Bloomberg survey of 29 economists.
The Indian rupee is projected to depreciate further, potentially reaching 85 against the US dollar due to a robust dollar and sluggish economic growth in India. Currency experts indicate that the USDINR pair may rise as the Dollar Index has surged approximately 3% recently, currently trading at 106.26.
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