Santa’s still M.I.A

Nifty50: 18,127 ▼ 71 (-0.3%)
Sensex: 60,826 ▼ 241 (-0.3%)

Hello, 

Every year, traders eagerly wait for the ‘Santa rally’... when the stock market sees a rise in the last week of December and the first two days of January. Though it originated in the United States, it has not been uncommon in the Indian markets for a decade now.

But here we are... One day to Christmas weekend and the markets can't get gloomier. So much so, that even some healthy economic numbers from the world's most robust economy failed to impress traders. Reason: COVID is back, new and more virulent and this time it goes by the name of BF.7 variant. Almost like a toxic lover, this clingy virus comes back when we are finally moving on. What can we say, but mask up and stay safe. 

• Nifty and Sensex slump after a higher opening.
• 41 of NIFTY50 stocks in the red.
• Indian indices unimpressed by positive U.S economic data.

All the sectoral indices closed in red with Realty (-1.4%) and PSU Bank (-1.2%) being the top losers.

What’s trending

⭐  Reliance adds METRO India to cart

RELIANCE (NSE): 2,577 ▼ 7.5 (-0.2%)

Reliance retail, a subsidiary of Reliance Industries, has announced acquisition of 100% equity stake in METRO India. This will be done via an all cash deal worth ₹2,850 crore. METRO India, is an arm of German wholesaler Metro. It was the first company to introduce cash and carry business format in India. It currently operates 31 large format stores across 21 cities. The company reported sales of ₹7,700 crore for the financial year ended September 2022. As per Reliance management, this acquisition aligns with its new retail business and will further strengthen its physical store footprint across India.

⭐ Aviation stocks fail to take-off

INDIGO (NSE): 1,970 ▼ 45 (-2.2%), SPICEJET (NSE): 37.4 ▼ 1.5 (-3.9%)

Shares of Interglobe Aviation andSpiceJet declined by 2.8% and 5.1% respectively intraday. This, after the health ministry announced India will begin random Covid tests on 2% of international travellers arriving in India.. The decision comes after a surge in COVID cases in several countries, including China. Any travel restrictions could have an adverse impact on the aviation sector, which is yet to fully recover from pandemic-induced losses.

⭐ Tata Communications’ new acquisition  

TATACOMM (NSE): 1,261 ▼ 9.5 (-0.7%)

Tata Communication has acquired a 100% equity stake in the U.S based company, The Switch Enterprises is a live video production and transmission services provider. The all-cash deal is valued at ₹486.3 crore. This deal will help Tata Communications in expanding its video connect business and build presence in the media ecosystems of Europe and North America. 

⭐ FPIs home in on realty stocks

Foreign portfolio investors (FPIs) have been busy with some year-end shopping in Indian equities, and they are zoning in on real estate. For the second consecutive month, FPIs have turned net buyers when they pumped in ₹ 9,017 crore in Indian markets. Nearly half - about ₹4421 crore- of the inflows in the first half of December have gone into the realty and construction segment . As per market experts, FPI’s interest in real estate can be attributed to the fact that it is linked more to the domestic economy, which has stayed resilient despite global challenges.

In Focus

Defensive play by investors

The Indian stock market has been quite volatile in December, with the benchmark Nifty50 index having fallen 3.3% this month alone. However, some defensive stocks from the Pharma and FMCG sectors have seen strong traction among investors. Why is this happening? Let's explore.

What are Defensive stocks? 

Defensive stocks include stocks of companies that tend to be stable irrespective of market or economic conditions. These comprise sectors like pharmaceuticals and consumer staples like FMCG and utilities. 

In an economic slowdown, people tend to cut down on discretionary spends like automobiles, leisure travel etc. However, spending on staples like soaps, toothpaste and healthcare facilities stays stable.To benefit from this stable demand, investors move their ‘smart money’ into defensive stocks in a recession. 

What’s the trigger now? 

A consistent hike in interest rates in major economies to combat inflation could likely impact economic growth. As fear of recession (in economies like the U.S) mounts, investors are preferring defensive stocks. 

Not just the domestic traders, but even the foreign portfolio investors (FPIs) are treading cautiously in this economic climate. In the first half of December, FPIs directed nearly ₹3,932 crore or 43% of their total investment towards the FMCG and Healthcare segment. 

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