Indian equity benchmarks erased early gains and ended lower in the volatile session on Tuesday, due to profit taking by investors ahead of release of crucial CPI and IIP data due later in the day. The US Federal Reserve's policy decision also remained in focus. Markets started the trading session on a positive note, as traders took some support with the Reserve Bank of India (RBI) in its report on state budgets, which is done annually, stating that states' finances improved in FY23, and there is a need to look at asset monetisation to help garner non-tax revenues. It stated road, transport and power sectors hold considerable potential where the states can undertake asset sales. Some support also came with provisional data from the National Stock Exchange (NSE) showing that foreign institutional investors (FIIs) net bought shares worth Rs 1,261.13 crore on December 11. However, markets erased all of their initial gains and fell sharply in second half of trading session, as traders turned cautious with the International Monetary Fund's official warning that fragmentation in the global economy and clear shifts in underlying bilateral trade could trigger a new Cold War given the conflict in Ukraine and U.S.-China tensions. Traders overlooked Finance Minister Nirmala Sitharaman's statement that retail inflation is now stable and temporary increases in inflation on a few occasions are caused by demand-supply mismatches arising out of global shocks and adverse weather conditions. Traders also paid no heed towards report that the government is likely to stick to the budgeted estimate of total tax collection target of Rs 33.61 lakh crore for current fiscal in the revised estimates. So far, direct tax collection is up by about 20 per cent and indirect tax is higher by 5 per cent. Finally, the BSE Sensex fell 377.50 points or 0.54% to 69,551.03 and the CNX Nifty was down by 90.70 points or 0.43% to 20,906.40.

The US markets settled higher on Tuesday following the release of a highly anticipated Labor Department report showing U.S. consumer prices inched up in line with street estimates in the month of November. The Labor Department said its consumer price index crept up by 0.1 percent in November after coming in unchanged in October. The uptick matched expectations. Excluding food and energy prices, core consumer prices rose by 0.3 percent in November after edging up by 0.2 percent in October. The increase in core prices also came in line with estimates. The report also said the annual rate of consumer price growth slipped to 3.1 percent in November from 3.2 percent in October, while the annual rate of core consumer price growth was unchanged at 4.0 percent. The data has added to optimism about the outlook for interest rates ahead of the Federal Reserve's monetary policy announcement on Wednesday. While the Fed is widely expected to leave interest rates unchanged, traders will be looking to the accompanying statement and projections for signs the central bank could begin cutting rates next year. On the sectoral front, despite the advance by the broader markets, gold stocks showed a substantial move to the downside, dragging the NYSE Arca Gold Bugs Index down by 3.2 percent. The continued weakness among gold stocks came amid a slight decrease by the price of the precious metal, with gold for February delivery edging down $0.50 to $1,993.20 an ounce. Energy stocks also saw significant weakness on the day, as the price of crude oil for January delivery plunged $2.71 to $68.61 a barrel.

Crude oil futures ended deeply in red with cut of over three and half percent on Tuesday amid lingering concerns about the outlook for fuel demand and worries about possible oversupply in the market. Worries about oversupply persist despite OPEC+'s plans to reduce output by 2.2 million barrels per day in the first quarter of 2024, as production in the U.S. reached a fresh all-time high of 13.2 million bpd in September, and production in Canada is set to rise by 10% next year to a record high of around 5.3 million bpd. Also, data showing persisting inflationary pressures reinforced the view that the Federal Reserve is unlikely to cut interest rates anytime soon. The Labor Department's report said the consumer price index crept up by 0.1% in November after coming in unchanged in October. Benchmark crude oil futures for January delivery fell $2.71 or about 3.8 percent to settle at $68.61 a barrel on the New York Mercantile Exchange. Brent crude for February delivery dropped $2.79 or about 3.7 percent to settle at $73.24 a barrel on London's Intercontinental Exchange.

Indian rupee ended flat on Tuesday as investors remained cautious ahead of the release of domestic inflation data and the upcoming US Fed meeting. Investors overlooked report that Finance Minister Nirmala Sitharaman said retail inflation is now stable and temporary increases in inflation on a few occasions are caused by demand-supply mismatches arising out of global shocks and adverse weather conditions. Besides, Reserve Bank of India (RBI) in its report on state budgets, which is done annually, stating that states' finances improved in FY23, and there is a need to look at asset monetisation to help garner non-tax revenues. On the global front, dollar ticked lower on Tuesday and the yen regained some ground it had lost in the past two sessions as traders turned their focus to U.S. inflation data later in the day and a slew of central bank meetings ahead. Finally, the rupee ended flat with its previous close of 83.37 on Monday.

The FIIs as per Tuesday's data were net buyers in both equity and debt segments. In equity segment, the gross buying was of Rs 11186.76 crore against gross selling of Rs 10314.85 crore, while in the debt segment, the gross purchase was of Rs 889.89 crore with gross sales of Rs 564.06 crore. Besides, in the hybrid segment, the gross buying was of Rs 101.20 crore against gross selling of Rs 44.68 crore.

The US markets ended higher on Tuesday after inflation data did little to alter views for the timing of a rate cut by the Federal Reserve, as investors awaited the central bank's last policy decision of the year. Asian markets are trading mostly in red on Wednesday as traders waited for the year's final policy decision from the Federal Reserve and clues on whether the central bank will cut rates next year. Indian markets failed to hold opening gains and ended lower with cut of around half a percent each on Tuesday due to selling pressure in dying hours of trade. Today, markets are likely to open in green amid better-than-expected growth in the October Industrial Production data, coupled with lower-than-anticipated rise in November retail (CPI) inflation. India's industrial production hit a 16-month high in October, aided by a favourable base effect. On the other hand, retail inflation in November bucked the downward trend, reaching a three-month high partly because of a seasonal spike in vegetable prices. Sentiments will get a boost as Finance Minister Nirmala Sitahraman said the economy is moving in the right direction, and India has become the fastest-growing major economy in the world. She added Q2 growth of 7.6 per cent is the highest in the world. Some support will come as Fitch Ratings said India is likely to see broad policy continuity after elections in 2024, as the current dispensation is most likely to return to power. Traders may take note of report that the Lok Sabha cleared a net additional spending of Rs 58,378 crore in the current fiscal ending March 2024, with a large chunk going towards MGNREGA and subsidy on fertiliser. The gross additional spending sought by the government was over Rs 1.29 lakh crore, of which Rs 70,968 crore would be matched by savings and receipts. Meanwhile, in a bid to ease the compliance burden of alternative investment funds (AIFs), the Securities and Exchange Board of India (Sebi) has given them more time to credit units into the demat account of investors. However, there may be some cautiousness ahead of the US Federal Reserve's monetary policy outcome, due later tonight. Baking stocks will be in focus with report that public sector banks (PSBs) have written off aggregate loan amount of Rs. 10.42 lakh crore in the last nine years; according to data provided by the government in Parliament.

Support and Resistance: NSE (Nifty) and BSE (Sensex)

Nifty Top volumes

• Tata Motors has recorded its highest-ever monthly retail sales in November on the back of robust demand for its sports utility vehicles amid the festive period.
• Wipro has entered into a new agreement with RSA, one of the world's leading general insurance companies.
• Hindalco Industries is planning to significantly expand its manufacturing capacity of fine-quality aluminium foil that is used in rechargeable batteries to serve the rapidly growing market for EVs and energy storage systems.
• Mahindra & Mahindra has produced 69,875 units in November, up 13.4 per cent from 61,618 units produced in last year.