Domestic market barometer Nifty 50 began the December futures and options (F&O) series with a bang. The index surged 1.24% to end at 26,205.30 on Wednesday, the first day of the December series, inching closer to its record high of 26,277.35, scaled on September 27 last year.
Short covering in light of positive global cues amid rising expectations of a rate cut by the US Federal Reserve was the main factor behind the market’s rise. Experts expect the December series to augur well for the market, thanks to healthy domestic macro, hopes of an India-US trade deal and easing geopolitical tensions.
Nifty is just 1% below its record high. If there is no major negative news flow, the index may surpass the 26,500 mark by the end of the year.
“The outlook for the Indian stock market is bullish, and I believe the Nifty 50 may touch 26,800 by the end of this year,” said Rohit Srivastava, the founder and market strategist at Indiacharts.com.
What will drive the Nifty higher?
Let’s take a look at five key factors that can drive the market to new highs in December:
1. An India-US trade deal: The biggest trigger for the domestic market would be an India-US trade deal. US tariffs on Indian imports have been one of the biggest factors behind the domestic market’s underperformance this year.
If India manages to secure a favourable deal with the US, sectors such as textiles, chemicals, and gems and jewellery can see fresh momentum, which may have a rub-off impact on the mid and small-cap segments.
“If India manages to secure a tariff below 20%, the Indian stock market could bounce back sharply. This could also lead to significant short covering, pushing the market up by 3–4% in a single day,” said VK Vijayakumar, Chief Investment Strategist, Geojit Investments.
2. The return of FIIs: Foreign institutional investors (FIIs) have sold off Indian equities aggressively this year. If they resume buying Indian stocks, taking note of improved earnings, healthy macro, and valuation comfort, it may trigger a strong upside in the Indian market.
3. Q2 GDP numbers: India’s gross domestic product (GDP) grew by an impressive 7.8 per cent in Q1FY26. However, the growth in nominal GDP (economic expansion before adjusting for inflation) declined to 8.8 per cent against 9.6 per cent in the same period last fiscal. This raised concerns that there is still some weakness in the economy.
Now, the eyes are on the Q2 GDP numbers, scheduled for release on November 28. If data shows an uptick in nominal GDP during the quarter, it may give a significant boost to market sentiment even as inflation remains low.
4. Rate cuts: The US Federal Reserve and the Reserve Bank of India (RBI) are expected to announce rate cuts in December. These rate reductions will increase domestic and global liquidity, boosting market sentiment.
“Recent weak US jobs data has increased expectations of a possible Fed rate cut. If the Fed cuts rates, the RBI may follow, especially since India’s inflation numbers are improving. This could result in strong domestic and global liquidity, supporting the market,” said Ajit Mishra, SVP- Research at Religare Broking.
5. Further fall in crude oil prices: Brent crude prices have fallen about 18% this year so far. At present, they are below the $63 per barrel mark, and there are expectations that they could fall further if the war between Russia and Ukraine ends.
US President Donald Trump has announced parallel missions to Moscow and Kyiv to push for the proposed U.S.-backed peace plan, and an end to the biggest European conflict since World War II, which started on 24 February 2022, looks near.
JPMorgan sees Brent crude averaging about $58 a barrel in 2026 and then falling further. In case of greater oversupply, oil prices may plunge to nearly $30 by the end of 2027, according to the global financial firm.
Lower crude oil prices are a major positive for the Indian economy, as the country is one of the biggest oil importers globally. Simply put, lower oil prices mean lower trade deficit, a stronger rupee, lower inflation, reduced input costs for companies, and increased prospects of foreign capital inflow.
Conclusion
The market outlook is bullish, and the real question is not the index surpassing 26,500 by the end of the year but sustaining above this level.
A confluence of global and domestic tailwinds may drive the market up by about 4-5% in December, which means the Nifty 50 may breach even the 27,500 mark by the end of the year.
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Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
