Indian markets closed higher last Friday despite the rupee hitting a record low against the dollar, driven by month-end demand from importers and ongoing foreign investor (FII) outflows. Today, markets are expected to open cautiously as weak global cues and holiday-thinned trading weigh on sentiment, with a lack of significant domestic triggers.

FIIs sold equities worth ₹1,323.29 crore on December 27, further dampening market mood. Adding to concerns, Reserve Bank of India (RBI) data revealed an $8.4 billion drop in foreign exchange reserves, which now stand at $644 billion.

On a positive note, some relief may come from reports suggesting that economists expect the upcoming Union Budget to prioritize reforms boosting consumption, manufacturing, and employment. Additionally, India’s GDP is projected to grow by 6.5%-6.8% this fiscal year and accelerate to 6.7%-7.3% in FY2026, supported by strong consumption trends, services growth, and rising high-value manufacturing exports.

In sectoral news, electric vehicle (EV) stocks are likely to see traction as data from the Ministry of Road Transport and Highways (MoRTH) showed a 26.5% YoY surge in EV sales, reaching 1.94 million units in 2024. Meanwhile, banking stocks will be in focus following RBI’s report on the rising attrition rate of private sector bank employees, which poses operational risks.

Paint industry players may face pressure as CareEdge Ratings highlighted intensifying competition and shrinking margins. Power stocks could gain attention with India’s plans to expand coal-fired and hydro-power plants while boosting transmission infrastructure to meet its "Power for All" goal by 2025.

Globally, US markets ended lower on Friday amid low trading volumes, while Asian markets traded mixed on Monday. Investors are now awaiting China's manufacturing PMI data set for Tuesday.

Back in India, benchmark indices showed resilience last Friday, supported by positive economic outlooks from the Finance Ministry, which projected 6.5% GDP growth for FY2025. India’s market capitalization also surged 18.4% this year, reaching $5.18 trillion, making it the fifth-largest globally. However, the depreciation of the rupee, which has weakened by 2.34% against the dollar this year, raised concerns about higher import costs.

Despite these challenges, strength in auto, healthcare, and FMCG stocks helped maintain market gains. The BSE Sensex closed 226.59 points higher at 78,699.07, while the CNX Nifty advanced 63.20 points to 23,813.40.