FPI Selling Tempers Holiday-Week Market Sentiment Despite Strong Fundamentals

The Indian stock markets opened slightly lower as FPI selling countered positive domestic fundamentals before the Christmas holiday. Nifty traded at 26,154.20, falling 12.85 points, while Sensex dropped 93.51 points. Factors affecting the markets include profit booking, liquidity measures, and global economic data. Asian markets showed mixed trends.

The domestic stock markets began Wednesday's session with a flat to marginally lower trajectory, as Foreign Portfolio Investor (FPI) selling pressured the market ahead of the Christmas holiday. Despite strong domestic fundamentals, this FPI activity tempered investor enthusiasm. Shortly after the opening bell, the Nifty 50 index stood at 26,154.20, reflecting a 0.05% dip. Simultaneously, the BSE Sensex experienced a decline of 93.51 points, settling at 85,431.33 in early trading.

Market observers noted that while overall market cues remained supportive, a combination of profit booking and foreign fund outflows is restraining upward momentum during this holiday-shortened week. Ajay Bagga, a Banking and Market Expert, shared with ANI that Indian markets were expected to open positively. However, persistent FPI selling over the previous two days and the struggle to breach key resistance levels indicate potential corrective action, especially as markets have hit overbought zones.

Bagga further highlighted that forthcoming liquidity enhancements - namely the Reserve Bank of India's planned open market operations and a significant dollar-rupee swap - should bolster liquidity and support the Indian rupee, despite its underperformance among Asian currencies in 2025. On Tuesday, the rupee depreciated by five paise against the US dollar despite the latter's broader weakness. This currency depreciation remains a hindrance to revitalizing FPI inflows, with domestic institutional investors stepping in to buy Rs 3,812.37 crore of equities against FPI sales of Rs 1,794.80 crore. Ponmudi R, CEO of Enrich Money, suggested that the Nifty 50 remains in a consolidation phase, noting critical support levels and a robust demand base around the 26,000-25,950 range. Meanwhile, prolonged sustenance above 26,000 could extend the mildly bullish outlook.

On the global front, robust US economic performance - highlighted by a two-year high in Q3 GDP growth at 4.3% and significant consumer spending and export hikes - buoyed US markets. This was further supported by investments in AI technologies and defense, propelling indices like the S&P 500 to new highs. Mixed trends were observed across Asian markets with slight declines in Australia due to rate hike concerns, while indices in Japan, Hong Kong, South Korea, and Taiwan posted modest gains.

(With inputs from agencies.)