Domestic markets are expected to open on a flat note on Monday amid selling by foreign portfolio investors (FPIs) and weak global market sentiment. The decline of the rupee is adding pressure on the stock markets. Following the Reserve Bank of India’s (RBI) recent rate cut, attention has shifted to the U.S. Federal Reserve’s meeting on December 10, where expectations are high for another interest rate cut. Market participants are particularly focused on the statements from Fed Chair Jerome Powell following the meeting.
The Gift Nifty, indicating early market trends, stands at 26,325, signaling a flat opening. Most Asian stocks are in the red at the start of the trading day on Monday.
Key economic events this week include India’s Consumer Price Index (CPI) report on December 12, following an October inflation reading at a record low of 0.25 percent. Additional data on loan growth, deposit growth, and foreign exchange reserves will also be monitored.
Ajit Mishra, Senior Vice President of Research at Religare Broking Ltd., recommends that investors adopt a balanced approach, favoring large-cap stocks and sectors expecting to gain from the rate cut, specifically financials, automotive, and domestic cyclicals. He notes that export-oriented companies and IT sectors may continue receiving support from the weaker rupee, while caution is advisable regarding rupee-sensitive and import-heavy sectors until currency volatility stabilizes. Traders are encouraged to adopt a “buy on dips” strategy around key support levels, focusing on stock-specific opportunities while managing position sizes ahead of the pivotal FOMC meeting.
Emkay Global Research noted in its strategy report that RBI’s 25 basis points repo rate cut and a liquidity infusion of ₹1.45 lakh crore (0.55 percent of net demand and time liabilities) resulted in a 6-10 basis points rise in short-end bonds. This development alleviates stress on long-term bonds and contributes positively to equity markets, leading the firm to retain an optimistic outlook on Indian equities. They suggest focusing investments on non-banking financial companies (NBFCs), small and mid-sized banks, and auto sectors.
The persistent selling by foreign investors is raising concerns among analysts. VK Vijayakumar, Chief Investment Strategist at Geojit Investments, reported that December has started with ongoing FII selling, amounting to ₹10,401 crore in the cash market during the first week ending December 5. In contrast, domestic institutional investors (DIIs) purchased equities worth ₹19,783 crore in the same period. This disparity arises from differing fundamental reasons: FIIs are divesting due to the rupee’s sharp depreciation of approximately 5 percent this year.
Vijayakumar explained that it is common for FIIs to pull funds during currency depreciation, while DIIs benefit from steady fund flows, underlined by robust GDP growth figures and positive corporate earnings expectations. The RBI’s rate cut and proposed liquidity measures have further boosted sentiment among domestic investors. He emphasized that despite stable fiscal and monetary policies, and signs of accelerating earnings growth, FIIs may continue to sell at higher market levels, believing valuations are elevated and opting to invest in cheaper markets elsewhere. This tug-of-war between FIIs and DIIs may result in sharp market movements in response to news and events, such as a potential fair trade agreement between India and the U.S.
In terms of derivatives trading, analysts indicate a neutral view with a positive bias. According to Dhupesh Dhameja, Derivatives Research Analyst at SAMCO Securities, the derivatives landscape shows a constructive shift in market sentiment, marked by aggressive position additions by put writers at current and near-term strike prices. At the same time, call writers are reducing their exposure and shifting to higher strike levels, reflecting expectations of continued buy-on-dips behavior. The Put-Call Ratio (PCR) has rebounded to 1.19 from 0.80, signaling increased bullish positioning and optimism as put writers regain dominance at lower levels.
Published on December 8, 2025.
