Santa Rally 2024: Can Indian Markets Rebound Amid Challenges?
As December progresses, Indian stock markets face a steep 31% decline, casting doubt on the possibility of a Santa Rally—traditionally marked by rising stock prices between Christmas and New Year. Unlike prior years where benchmark indices, such as the Nifty 50, recorded notable gains, 2024 brings unprecedented challenges.
What Is a Santa Rally?
A Santa Rally refers to a seasonal phenomenon where stock markets globally exhibit strong performance in the last week of December. In India, this trend has been inconsistent, influenced by market dynamics, global cues, and investor behavior.
In 2023, Nifty surged by nearly 8% during December, reflecting investor optimism. However, this year, the narrative is different. Subdued Q2 earnings, FII outflows, and global economic concerns have pushed Nifty down nearly 10% from its all-time high of 26,277.35 on September 27, 2024, to an intraday low of 23,709.65 on December 24.
Challenges Hindering a 2024 Santa Rally
- Weak Quarterly Earnings
Muted Q2 results from several sectors have dampened market sentiment, leading to corrections in heavyweight stocks. - Relentless FII Outflows
Foreign Institutional Investors have been offloading positions, adding downward pressure on indices. - Global Economic Uncertainty
Factors such as geopolitical tensions, Federal Reserve policies, and inflation fears continue to weigh on markets.
Historical Trends: How December Performs for Nifty
| Year (December) | Nifty Performance |
|---|---|
| 2021 | +2.18% |
| 2022 | -3.5% |
| 2023 | +7.94% |
| 2024 (Till Dec 24) | -31% |
The stark difference between previous years’ positive gains and 2024’s steep decline has led analysts to believe a Santa Rally may not materialize this time.
What Analysts Say
Vikas Jain, Reliance Securities
“Key supports at 24,000 and the 200-day moving average at 23,800 are critical. If maintained, indices could rebound to 24,800, with potential to reach 25,200.”
Puneet Sharma, Whitespace Alpha
“Unlike Western markets, India lacks consistent Santa Rally patterns. Macroeconomic fundamentals and global cues play a larger role here.”
Yashovardhan Khemka, Abans Holdings
“Mid-cap and small-cap indices have historically shown resilience. Over five years, they delivered average December gains of 4.37% and 5.96%, respectively.”
Key Events to Watch
- RBI Policy Review (Feb 5-7, 2025)
Monetary policy updates could influence investor sentiment heading into the new year. - Union Budget 2025
Pre-budget expectations will shape market trajectories. - US Fed & Global Politics
Donald Trump’s swearing-in and Federal Reserve decisions on rate cuts could impact global markets.
Why Santa Rally May Not Fit Indian Context
- Steady Trading Volumes: Unlike Western markets, India maintains consistent trading activity, reducing scope for anomalies.
- Institutional Adjustments: DIIs and FIIs focus more on year-end adjustments than seasonal sentiment.
- Economic Resilience: Indian markets rely heavily on fundamentals rather than seasonal patterns.
Conclusion
While a Santa Rally looks unlikely in 2024, market movements remain closely tied to global and domestic factors. Looking ahead, several macroeconomic and geopolitical factors will shape market trajectories. The RBI’s monetary policy review (February 5-7, 2025) will be a critical event, as any dovish policy stance could provide a much-needed boost to market sentiment. Additionally, the upcoming Union Budget 2025 is expected to lay the groundwork for India’s economic priorities, offering clarity on fiscal policies and infrastructure investments.
Global factors, such as the Federal Reserve’s updated stance on interest rate cuts, geopolitical developments, and trade policies under the incoming US administration, will also play a pivotal role. Any positive cues from these fronts could help Indian markets regain momentum.
While a Santa Rally might not materialize this year, the focus should shift toward building a robust portfolio for the long term, keeping an eye on macroeconomic developments and sectoral opportunities. As 2025 approaches, market participants should stay vigilant and adopt a disciplined approach to investing, preparing for a potentially rewarding year ahead.
Stay informed, and make data-driven decisions to navigate the market effectively!
