12-Feb-2025
2 mins read
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Here is today's market update. Today, we bring to you the key developments that are likely to impact the Indian stock market on February 13, 2025, including the RBI's Open Market Operations (OMO), the high-level meeting between Prime Minister Narendra Modi and President Donald Trump, and the likely new Income Tax Bill.
Key Events on February 13, 2025
RBI Open Market Operations (OMO):
Action: RBI will purchase ₹40,000 crore worth of government securities to inject liquidity into the banking system.
Expected Impact:
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Liquidity Boost: This should lower the cost of borrowing, allowing companies to expand more easily and consequently improving overall market sentiment.
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Banking & Financial Stocks: Banks, NBFCs, and housing finance companies will be the beneficiaries of lower interest costs, which can lead to a rally in these sectors.
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Bond Yields & Equities: As the yields on government bonds fall with increased demand, investors may shift funds to equities, benefiting interest-sensitive sectors like real estate, infrastructure, and autos.
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Rupee Strengthening: Higher liquidity is likely to bring in foreign institutional investors (FIIs), which can strengthen the INR—positively impacting import-intensive sectors like oil, pharma, and electronics.
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Inflation Considerations: While the injection reduces a liquidity deficit, excess liquidity can create inflation worry and possible speculation on future rate hikes, causing short-term volatility.
Modi–Trump High-Level Meeting:
The meeting date is set to be held on February 13, 2025. In the meeting the leaders are likely to focus on increasing bilateral trade, investment, and defense cooperation.
Probable Impact on Markets:
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Trade & Investment: A positive aspect could lead to steps lowering tariffs and opening up market access for Indian exports, improving investor sentiment in sectors like IT Services and Pharmaceuticals.
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Defense & Infrastructure: Joint venture announcements can provide a fillip to defense and infra stocks.
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Investor Sentiment: Optimism can reinforce market optimism, leading to broader market rallies.
Upcoming New Income Tax Bill:
Expected Announcement: Shortly after February 13, 2025
Highlights:
The bill is likely to streamline the complex Income Tax Act by reducing its text by nearly 50% and eliminating obsolete provisions.
Likely Impact:
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Boost to Disposable Income: With a higher exemption limit (perhaps zero tax on incomes up to INR 12 lakh), middle-class families can look forward to higher take-home pay, which will boost consumer spend in FMCG, Realty, and Consumer Durables.
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Investor Confidence: A simplified tax regime should improve business predictability and investor confidence, leading to long-term market growth.
Market Implications
Short-Term Outlook:
The RBI's liquidity injection and the positive sentiment following the Modi–Trump meeting should provide an immediate fillip to the markets. We expect higher liquidity to result in a rally in banking, NBFC, and infra stocks, while improved bilateral relations could boost export-oriented and defense segments.
Sectoral Impact:
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Financial Sector: Lower cost of borrowing and improved availability of credit should benefit banks and NBFCs.
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Realty & Infrastructure: With bond yields likely to soften, these sectors could see improved investor interest as money moves into equities.
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Consumer Sectors: The new Income Tax Bill could enhance disposable incomes, leading to growth in FMCG and Consumer Durables.
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Global Risks: Any lingering geopolitical uncertainties, however, could still inject volatility, necessitating cautious positioning.
Conclusion
On February 13, 2025, major policy actions and top-level diplomatic interactions will provide a supportive backdrop for Indian equities. While the RBI's OMO will relax liquidity conditions and reduce the cost of borrowing, the Modi–Trump summit will be expected to set off more robust trade and investment relations. Additionally, the upcoming Income Tax Bill will propel consumer spending through higher disposable incomes. Together, these events are likely to leave a positive short-term impression on the Indian stock market, while investors will need to remain vigilant to potential inflationary and geopolitical threats.