Indian equity benchmarks traded flat on Friday, hovering near record highs as investors awaited key quarterly growth data. Both the Nifty 50 and the Sensex experienced marginal gains in early trading but struggled to maintain momentum ahead of the release of the GDP figures.
As of 10:19 a.m. IST, the Nifty 50 edged up 0.05% to 26,229.25, while the Sensex gained 0.08% to 85,784.49. Earlier in the session, both indices had risen by as much as 0.2%, but these gains proved unsustainable. On Thursday, the Nifty and Sensex reached all-time highs of 26,310.45 and 86,055.86, respectively, before closing with little change due to profit-booking by foreign investors.
Market analysts suggest that the flat trading pattern reflects investor indecision ahead of the growth data release, which is expected to show a resilient Indian economy. A Reuters poll forecasts GDP growth at 7.3% for the July-September quarter, driven by strong consumer demand, increased production, and exports ahead of potential U.S. tariffs. The data is scheduled for release after market hours on Friday.
The mixed performance across sectors indicated a cautious market sentiment. Nine of the 16 major sectors recorded gains, while the broader small-cap and mid-cap indices experienced declines of 0.3% and 0.1%, respectively. This divergence highlights a paradox in the market, where benchmark indices reach new highs, but many retail investors, particularly those focused on small-cap stocks, are still facing losses. According to VK Vijayakumar, Chief Investment Strategist at Geojit Investments, this is due to an overemphasis on small-caps and the belief that they will outperform regardless of valuation.
Furthermore, the advance-decline ratio of the BSE and NSE has remained below 1, signaling that more stocks are falling than rising across the market. Analysts anticipate that bouts of profit-booking may continue in the lead-up to the release of the growth data.
In specific stock movements, Mahindra & Mahindra rose 1.8%, boosting the auto index by 0.6%, after Nomura named it as a top sector pick, citing the future performance of its new electric SUV. Conversely, GAIL (India) fell 5.2% following a regulator's transmission tariff hike of 12%, which was lower than the company's expectation of 20%. Ashoka Buildcon also declined by 3% after the National Highways Authority of India temporarily suspended the company from bidding for projects.
The flat opening comes amid optimism about potential interest rate cuts both in the U.S. and India. Gift Nifty futures hinted at a higher opening, trading at 26,410.5 as of 08:09 a.m. IST, suggesting the Nifty 50 could surpass the previous session's close. Foreign portfolio investors (FPIs) withdrew 12.55 billion rupees from Indian markets on Thursday, while domestic institutional investors (DIIs) provided support with inflows of 39.41 billion rupees.
The Nifty 50 and Sensex hitting new peaks after 14 months can be attributed to improving earnings, attractive valuations, steady economic growth, and supportive government policies. While GDP growth remains robust, low inflation has created potential for further monetary easing, with expectations of a 25 basis points rate cut by the Reserve Bank of India on December 5. Rate-sensitive financial stocks have been key drivers of market gains recently.
