Indian equity benchmarks scaled new record closing highs and managed to close with modest gains after a volatile session on Tuesday led by buying in Energy, FMCG and PSU stocks. Markets made a slightly positive start but soon gave up all the early gains and traded lower in the first half as traders turned cautious with provisional data from the National Stock Exchange (NSE) showing that foreign institutional investors (FIIs) net sold shares worth Rs 33.51 crore on December 18. Some concern also came as economic think tank the Global Trade Research Initiative (GTRI) in its latest report stated that India's exports worth $775 million to the UK may be impacted due to Britain's decision to introduce carbon tax on products such as iron and steel, aluminium, fertiliser and cement, from 2027.  The UK government on December 18 decided to implement its Carbon Border Adjustment Mechanism (CBAM) starting 2027. However, buying in select heavyweights cut all the losses as the day progressed. Traders took some support with report that domestic rating agency Icra revised its FY24 GDP growth forecast to 6.5 per cent from 6.2 per cent earlier. It said the revision is being done because Icra feels the deflation in commodity prices will be sustained and there are expectations of better growth in the October-December period than previous estimates. Some optimism also came with International Monetary Fund's (IMF) statement that India's robust economic growth, propelled by key reforms in digitisation and infrastructure, positions it as a leading global contributor, accounting for over 16 per cent of the world's growth. Traders also took note of report that India and UK have wrapped up the 13th round of negotiations on the Free Trade Agreement after four months of in-person and virtual meetings and the next round will be held in January. These negotiations (in 13th round) focused on complex issues including goods, services and investment. Finally, the BSE Sensex rose 122.10 points or 0.17% to 71,437.19 and the CNX Nifty was up by 34.45 points or 0.16% to 21,453.10.

The US markets settled higher on Tuesday as San Francisco Federal Reserve President Mary Daly said interest rate cuts are likely to be appropriate next year because of an improvement in inflation. The Federal Reserve must make sure we don't give people price stability but take away jobs. Optimism about the outlook for interest rates continued to contribute to strength on markets following the Federal Reserve's monetary policy announcement last week. While the Fed's latest projections pointed to three interest rate cuts next year, investors widely expect the central bank to lower rates more aggressively. On the sectoral front, gold stocks showed a substantial move to the upside on the day, driving the NYSE Arca Gold Bugs Index up by 2.9 percent to a five-month closing high. The rally by gold stocks came amid an increase by the price of the precious metal, with gold for February delivery climbing $11.60 to $2,052.10 an ounce. On the economic data front, the Commerce Department released a report this morning unexpectedly showing a substantial increase in new residential construction in the U.S. in the month of November. The report said housing starts soared by 14.8 percent to an annual rate of 1.560 million in November after inching up by 0.2 percent to a downwardly revised rate of 1.359 million in October. The surge surprised participants, who had expected housing starts to decrease by 0.9 percent to an annual rate of 1.360 million from the 1.372 million originally reported for the previous month. Meanwhile, the Commerce Department said building permits slumped by 2.5 percent to an annual rate of 1.460 million in November after jumping by 1.8 percent to an upwardly revised rate of 1.498 million in October.

Crude oil futures ended higher on Tuesday, extending their previous session's gains, amid concerns about supplies following several companies rerouting their vessels due to the attacks by the Houthi militants in the Red Sea. Several countries, led by the U.S. have agreed to jointly carry out patrols in the southern Red Sea and Gulf of Aden after the Iran-backed Houthis waded into the Israel-Hamas conflict by attacking vessels in vital shipping lanes, causing supply disruptions and raising supply concerns. The Houthis have reportedly vowed to defy the U.S.-led naval mission and keep hitting Israeli targets in the region. Benchmark crude oil futures for January delivery rose $0.97 or 1.3 percent to settle at $73.44 a barrel on the New York Mercantile Exchange. Brent crude for February delivery was up by $1.28 or 1.6 percent to settle at $79.23 a barrel on London's Intercontinental Exchange.

Indian rupee ended lower against dollar on Tuesday due to dollar buying by importers amid lingering worries over oil supplies through the Red Sea route. Investors were worried as economic think tank the Global Trade Research Initiative (GTRI) in its latest report has said that India's exports worth $775 million to the UK may be impacted due to Britain's decision to introduce carbon tax on products such as iron and steel, aluminium, fertiliser and cement, from 2027. The UK government on December 18 decided to implement its Carbon Border Adjustment Mechanism (CBAM) starting 2027. On the global front, yen tumbled on Tuesday after the Bank of Japan (BOJ) maintained its ultra-loose monetary policy, as expected, and more surprisingly did not signal a change was approaching, while the dollar drifted at the low end of its recent range. Finally, the rupee ended at 83.18 (Provisional), weaker by 8 paise from its previous close of 83.10 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 12513.75 crore against gross selling of Rs 10727.24 crore, while in the debt segment, the gross purchase was of Rs 3044.37 crore with gross sales of Rs 888.20 crore. Besides, in the hybrid segment, the gross buying was of Rs 47.61 crore against gross selling of Rs 39.97 crore.

The US markets ended higher on Tuesday as last week's dovish policy pivot from the Federal Reserve continued to reverberate and investors looked ahead to crucial inflation data. Asian markets are trading mostly in green on Wednesday with Japan stocks extending gains to another session after the country's central bank left its ultra-loose monetary policy unchanged at its final meeting this year. Indian markets ended lackluster session with decent gains on Tuesday, as Reliance Industries, FMCG, and financials gained ground. Today, domestic markets are likely to make gap-up opening as global cues continue to remain encouraging. Traders will be taking encouragement as the finance ministry said tax reforms, a sharp hike in capital spending without weakening fiscal discipline and robust public digital infrastructure are among a raft of steps initiated by the Modi government that would help India emerge as a $5-trillion economy. Some support will come as International Monetary Fund's Executive Board said Indian economy is likely to log 6.3% growth in FY24 and FY25 on the back of macroeconomic and financial stability. Besides, Parliament gave its approval for a net additional spending of Rs 58,378 crore in the current fiscal ending March 2024, with a large chunk allocated to MGNREGA and fertiliser subsidies. The gross additional spending would be more than Rs 1.29 lakh crore, out of which Rs 70,968 crore would be matched by savings and receipts. However, foreign fund outflows likely to dent sentiments. Provisional data from the National Stock Exchange (NSE) showed that foreign institutional investors (FIIs) net sold shares worth Rs 601.52 crore on December 19. There may be some cautiousness as Union Agriculture Minister Arjun Munda said share of agriculture in India's GDP declined to 15 per cent last fiscal year from 35 per cent in 1990-91 due to rapid growth in the industrial and service sector. The decline is brought out not by the decline in agricultural GVA but a rapid expansion in industrial and service sector GVA. Traders may be concerned with a private report that investments by private equity and venture capital funds plummeted to a 43-month low of $1.6 billion in November. There will be some reaction in banking and NBFCs stocks after India's central bank asked entities regulated by it, including banks and non bank finance companies (NBFCs), to stay away from investing in alternate investment funds which have investments in existing and recent borrowers. Aviation industry stocks will be in focus as credit rating agency ICRA said the Indian aviation industry is expecting to show a year-on-year (Y-o-Y) revenue growth of 15-20 per cent and 10-15 per cent, respectively, in financial years 24 (FY24) and 25 (FY25). Meanwhile, DOMS and India Shelter Home will be in focus as they mark their debut on the bourses.

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

Nifty Top volumes

• Sun Pharmaceutical Industries has entered into agreement to acquire around 16.7% shares on fully diluted basis, in Lyndra Therapeutics, Inc.
• JSW Steel's wholly owned subsidiary -- Periama Holdings LLC has completed the acquisition by purchase of the remaining 10% stake in the Common stock of JSW Steel (USA) Inc.
• LIC has diluted its shareholding in Tata Motors.
• LTIMindtree has collaborated with Microsoft to introduce cutting-edge, AI Powered Employee Engagement Applications.