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The Indian economy has begun to hum again in the December quarter as signalled by key activities after moderating in the second fiscal quarter, and inflation is forecast to average below the targeted 4% next fiscal year, said the latest monthly report on the economy by the Reserve Bank of India (RBI).The economy is likely to expand at 6.7% next fiscal year and inflation may average 3.8%, providing room for the Monetary Policy Committee (MPC) to reduce key policy rate at its next meeting in February."High frequency indicators (HFIs) for the third quarter of 2024-25 indicate that the Indian economy is recovering from a moderation in momentum witnessed in Q2, driven by strong festival activity and a sustained upswing in rural demand,'' said the central bank's State of the Economy by its research department.To be sure, the RBI maintains the views contained in the report do not necessarily represent its own opinion.India's economic growth fell to a seven-quarter low in September at 5.4% triggering calls for a reduction in interest rates to get the momentum back. But the central bank, mandated to target inflation as measured by the Consumer Price Index at 4% in a two percentage point band, maintained status quo citing inflation which was above its upper band of 6%.The debate has been raging that the central bank needs to look beyond food prices which have a weighting of more than 40% in the index, but the RBI has been steadfast in saying that it would be foolish to strip food out of the CPI target. So much so, the last MPC meet saw two of the six members dissenting in favour of a rate cut.But the RBI's assessment of data shows that economic activity has been improving after a blip."E-way bills increased by 16.3% on year in volume terms in November. Toll collections recorded double-digit growth in November 2024, both in value and volume terms,'' the report said.It is not just the economic activity which is accelerating, but the keenly monitored employment generation is also showing signs of improvement and breaking records."Employment in the organised manufacturing sector witnessed an expansion for the ninth consecutive month as per the PMI," the report said. "The rate of job creation in the services sector expanded at the fastest pace since the survey's inception," which was in 2005.The central bank researchers also highlighted the complications arising from the consumer behaviour on macroeconomic variables and the limitations of the conventional economic models to come up with apt policy prescriptions."These shifts in consumer behaviour may require central banks and policymakers to transition from traditional macroeconomic models to agent-based modelling, integration of behavioural economics, nowcasting, policy simulations and advanced liquidity stress tests," said the report. "They also need to equip themselves with cutting-edge computational tools like machine learning and big data analytics." The researchers also said that one of the most commonly used benchmarks - the natural rate of interest rate - the rate that reflects the real interest rate that supports the economy at full employment while keeping inflation low and stable - has also undergone changes making rate decisions difficult."A better understanding of the reasons behind the post-pandemic reversal and this recent disconnect from history will be useful for monetary policy setting in an uncertain future. Global economic conditions add complexity to an accurate assessment of R-star,'' it said . R-star is the natural rate of interest.

The Central government's air quality monitoring panel on Tuesday revoked Stage IV ('Severe+') measures under the Graded Response Action Plan (GRAP) in Delhi and the National Capital Region (NCR) following an improvement in air quality. However, actions under Stages I, II, and III will remain in force to prevent any further deterioration of air quality, the Commission for Air Quality Management (CAQM) announced on December 24.The decision comes after Delhi's Air Quality Index (AQI) improved to 369 ('Very Poor') at 4 PM on December 24, down from a peak of 401 ('Severe') recorded on December 16.The improvement in air quality was attributed to favourable meteorological conditions, including improved wind speed, according to forecasts from the India Meteorological Department (IMD) and the Indian Institute of Tropical Meteorology (IITM). In line with the Supreme Court's directives, Stage IV measures were initially invoked when AQI levels breached the 400 mark on December 16.The measures were aimed at curbing severe pollution levels and included restrictions on industrial activities, construction, and entry of non-essential trucks into Delhi.The Graded Response Action Plan (GRAP) is a set of emergency measures implemented in Delhi-NCR to tackle air pollution based on the severity of the Air Quality Index (AQI). The centre's air quality panel stressed the importance of continued vigilance. "Actions under Stage I, II, and III of the revised GRAP shall remain invoked and be implemented, monitored, and reviewed by all the agencies concerned in the entire NCR to ensure that the AQI levels do not slip further," the commission said in its order.Citizens were also urged to adhere to guidelines under Stage III. "Keeping in view the winter season, when weather conditions may not always be favorable, and to ensure that AQI levels do not slip further, citizens are requested to strictly adhere to the Citizen Charter under GRAP-III," the commission added. The CAQM Sub-Committee on GRAP assured that it would continue to monitor air quality and issue appropriate directives as necessary, stating, "The Sub-Committee shall be keeping a close watch on the air quality scenario and review the situation from time to time for further appropriate decisions depending upon the air quality in Delhi and forecasts made by IMD/IITM."

Indian headline indices, Sensex and Nifty, ended with minor declines on Tuesday, dragged down by IT and bank stocks. The 30-stock BSE Sensex finished at 78,472.87, down by 67.30 points or 0.09%, while the broader Nifty50 closed at 23,727.65, declining by 25.80 points or 0.11%."Nifty breached the critical support of the 200 DMA with volumes, which indicates the index could slide further and test the swing low of 23,300 on the downside," said Kunal Shah, Senior Technical and Derivative Research Analyst at Mirae Asset Sharekhan. "The real pain was visible in the broader markets, where the advance-decline ratio stood at 1:4," he added."On the daily chart, Nifty is trading below the 20-day moving average (DMA) and the 40-day exponential moving average (DEMA) of 24,363 and 24,350, respectively. The momentum indicator has a negative crossover on the daily chart," Shah added.The stock markets will remain closed for trading on Wednesday due to the Christmas holiday.What should traders do? Here's what analysts have to say:Osho Krishnan, Angel OneFor the last two sessions, the 23,900 mark for Nifty has acted as significant resistance, aligning with the 200-day simple moving average (DSMA). For the upcoming monthly expiry, the 23,900–24,000 zone remains a critical hurdle, and a break above this range is required to spark positive momentum heading into the year-end. On the downside, the 23,600–23,500 range, representing the lower end of last Friday's bearish candle, serves as immediate support.For the last two sessions, the 23,900 mark for Nifty has acted as significant resistance, aligning with the 200-day simple moving average (DSMA). For the upcoming monthly expiry, the 23,900–24,000 zone remains a critical hurdle, and a breakout beyond this range is needed to spark positive momentum heading into the year-end. On the downside, the 23,600–23,500 range, representing the lower end of last Friday’s bearish candle, serves as immediate support.Rupak De, LKP SecuritiesThe Nifty remained mostly range-bound throughout the day before closing flat. On the daily chart, the index closed below the 200-DMA for the first time in three days, confirming a short-term bearish trend. The RSI is in a bearish crossover and continues to decline, reinforcing the negative outlook. On the downside, support is placed in the 23,500–23,400 zone, while resistance is seen at 23,860.Hrishikesh Yedve, Asit C. Mehta Investment IntermediatesTechnically, Nifty attempted to cross the 200-Day Simple Moving Average (200-DSMA) hurdle but faced resistance near yesterday's high of 23,870, forming a small red candle. The 200-DSMA is currently placed near 23,850, which will act as an immediate hurdle for the index. A sustainable move above 23,850 could push the index higher to the 24,000–24,100 levels. On the downside, 23,500 will serve as immediate support. In the short term, the index is likely to consolidate within the range of 23,500–23,850. A breakout on either side will set the future direction of the index.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)