Indices begin 2025 with gains, marking 7th consecutive first-session rise

Markets are expected to remain subdued at the beginning of 2025, facing headwinds from expensive valuations, structural issues in domestic consumption demand

Indian equity benchmarks logged gains on the first trading day of 2025, marking the seventh consecutive first session of a calendar year when the indices ended in the green. The BSE Sensex rose by up to 617 points during the session but pared its gains to close at 78,507, an increase of 368 points, or 0.5 per cent. The National Stock Exchange Nifty, on the other hand, ended the session at 23,743, a rise of 98 points, or 0.4 per cent. The gains were broad-based, with the Nifty Midcap 100 advancing 0.4 per cent and the Nifty Smallcap gaining 1.02 per cent.

 

Most of the Sensex gains on Wednesday were contributed by HDFC Bank, which rose 0.6 per cent. Larsen & Toubro, up 1.6 per cent, and Mahindra & Mahindra, which gained 2.5 per cent, were the other major contributors to the Sensex’s performance.

 

Though the benchmark indices ended 2024 with gains of over 8 per cent, the year was marked by turbulence in the second half, which eroded much of the gains achieved in the first nine months.

 

The benchmark indices had surged by as much as 20 per cent on a year-to-date basis in September. However, a sharp sell-off by foreign portfolio investors (FPIs) — initially due to stimulus measures in China and later due to disappointing earnings — dampened sentiment.

 

Markets are expected to remain listless at the beginning of 2025, facing headwinds from expensive valuations, structural issues in domestic consumption demand, uncertain policy measures from the incoming US administration, and heightened geopolitical tensions.

 

“We note three headwinds for the Indian market in the short term: expensive valuations across caps and sectors barring financials, even as headline market valuation has come off; earnings cuts; and continued sluggish consumption demand,” said Kotak Institutional Equities in a note.

 

The note added that policies of the incoming US administration and rising geopolitical conflicts will impact the global economy and markets.

 

“India is more immune to both these issues, but global sentiment will matter for India too," the note said.

 

Looking ahead, corporate results for the quarter ended December and the Union Budget next month will determine the market's trajectory.

 

“We expect markets to remain sideways until the start of the third-quarter result announcements, which will likely induce stock- and sector-specific action. Investors will watch out for December manufacturing PMI data for India and the US,” said Siddhartha Khemka, head of research — wealth management at Motilal Oswal Financial Services.

 

The market breadth was strong, with 2,718 stocks advancing and 1,267 declining. More than two-thirds of Sensex stocks ended with gains. The total market capitalisation of BSE-listed firms rose by Rs 2.5 trillion to Rs 444.4 trillion.

 

FPIs were net sellers to the tune of Rs 1,783 crore, while their domestic counterparts bought shares worth Rs 1,690 crore. Foreign investors were net sellers of Rs 3,981 crore in 2024, while domestic institutions bought shares worth Rs 5.3 trillion.

 

“The index has entered its second week of consolidation, and current indicators suggest that this trend will likely persist. We continue to advocate a stock-specific strategy, focusing on counters exhibiting relatively stronger momentum,” said Ajit Mishra, senior vice-president of research at Religare Broking.