The Indian stock market closed on a weaker note on Friday, with the Nifty index slipping below the 25,000 mark for the first time in weeks. The Sensex also witnessed a decline, dropping 176 points as the auto and banking sectors faced notable pressure. However, in a contrasting performance, the metals sector emerged as a bright spot, fueled by speculation surrounding potential stimulus measures from the Chinese government.

Sectoral Performance

On the sectoral front, the auto, bank, power, and real estate sectors all fell by about 0.5 percent each. Conversely, the IT, metals, pharmaceutical, and media sectors showed resilience, rising between 0.5 to 1 percent. Notably, the BSE midcap and smallcap indices both rose by 0.5 percent, highlighting some pockets of strength in the broader market.

Inflation Concerns Impacting Markets

Adding to the cautious sentiment among investors were the latest inflation figures. The September consumer price index (CPI) saw a monthly increase of 0.2 percent, while the year-on-year figure rose by 2.4 percent, surpassing economists' expectations. The core CPI, which excludes volatile items such as food and energy, increased by 3.3 percent year-over-year, slightly above the estimated 3.2 percent.

This uptick in inflation has led to heightened fears that inflation is not cooling off quickly enough, complicating discussions regarding potential rate cuts by the Federal Reserve. Recent data also revealed a sharp rise in jobless claims in the United States, reaching 258,000—the highest level since early August. This development, along with the hotter-than-expected inflation figures, has intensified the debate over whether the Fed will implement a smaller rate cut next month or even consider pausing future rate changes.

The Atlanta Fed President Raphael Bostic mentioned that he would contemplate holding rates steady at the upcoming November meeting, depending on evolving economic conditions. This uncertainty over monetary policy has contributed to a bearish outlook in the markets, causing investors to closely monitor forthcoming producer inflation data for additional insights into price trends.

FII and Mutual Fund Movements

Over the past week, foreign institutional investors (FIIs) were net sellers in the Indian markets, offloading equities worth ₹26,831.8 crore. This trend includes the highest outflow from index options, amounting to ₹21,612.5 crore. On the flip side, mutual funds emerged as net buyers, investing ₹7,717.7 crore during the same period, reflecting a divergence in investor sentiment.

Metal Stocks Show Resilience

Despite the overall market decline, shares of metal companies surged by as much as 3.5 percent during the session, driven by renewed hopes for government stimulus from China. Earlier this week, profit booking had negatively impacted metal stocks following the lack of immediate stimulus measures announced by China's state planner regarding the country's struggling property sector. However, optimism returned when news surfaced that China's Finance Minister would hold a briefing, potentially discussing further stimulus measures to support the economy.

Analysts speculate that a fiscal stimulus package worth up to 2 trillion yuan (approximately $283 billion) could be in the works, rejuvenating interest in metal stocks.

Company-Specific Updates

Bondada Engineering saw its shares rise by 5 percent after securing two significant orders totaling ₹1,132 crore under the MSKVY 2.0 scheme. This includes the development of solar PV power plants across various districts in Maharashtra, reflecting a strong focus on renewable energy.

Cummins India faced a steep decline of 6 percent to ₹3,565 after Goldman Sachs downgraded the stock to 'sell,' citing multiple concerns, including a revised target price of ₹2,900. This downgrade is significant, reflecting broader market apprehensions about the company's growth trajectory in the current economic environment.

Ashoka Metcast surged by 20 percent, hitting the upper circuit after reporting a staggering 894.29 percent increase in net profit year-on-year for the quarter ending September 2024. This exceptional growth underscores the company's strong operational performance.

Tata Consultancy Services (TCS) shares ended lower following lackluster quarterly earnings that revealed challenges in operational performance and declining margins. Investors are closely monitoring TCS as it remains a bellwether for the IT sector.

Just Dial reported a doubling of its net profit to ₹154 crore in the September quarter, boosting its shares significantly, while CreditAccess Grameen saw a decline of 3 percent following a downgrade by Nomura.

Krsnaa Diagnostics achieved a new 52-week high of ₹902.4 after securing contracts with Ranchi Institute of Neuro-Psychiatry and Sadar Hospital, indicating robust growth in its operations.

Indus Towers received a 'Buy' rating from Citi, with a target price of ₹500, amid expectations of recovering past dues and new tenancies.

Bandhan Bank rose following the RBI's approval of a new MD and CEO, signaling stability and potential for growth.

UBS maintained its 'Neutral' stance on Kotak Mahindra Bank, highlighting challenges related to net interest margins and rising credit costs.

Goldman Sachs's downgrade of Cummins India emphasizes growing concerns over the shift towards sustainable energy solutions and its implications for traditional diesel generator demand.

Summary

In conclusion, while the Indian markets faced a decline on Friday, several sectors displayed resilience, particularly in metals and midcap stocks. The recent inflation data and ongoing discussions about Federal Reserve policy adjustments continue to shape market sentiment. The dynamics within specific companies, alongside FII movements and mutual fund investments, add layers of complexity to the market landscape. Investors remain vigilant as they navigate these developments, seeking opportunities amid the fluctuating market conditions.

As the week progresses, all eyes will be on forthcoming economic data releases and any announcements from China that may further influence market trends and investor decisions.

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