Markets week ahead: Fed’s meet, inflation data to influence sentiment in Sensex, Nifty 50

On Friday, Sensex shed 389.01 points or 0.62% to end at 62,181.67, while Nifty 50 tumbled by 112.75 points or 0.61% to close at 18,496.60. IT stocks were the worst hit, followed by a substantial downside in metal and capital goods stocks. However, the rupee ended slightly higher at 82.27 against the US dollar compared to the previous day’s 82.42 per dollar.

But overall in the week, markets performance was heavily volatile with bears taking the lead. In the week of December 5-9, Sensex contracted by 1.09%, while Nifty 50 plummeted by 1.07% — making it their biggest one-week fall since the week that ended September 30. The Indian currency also tumbled lower by 1.2% as the dollar sustained due to demand from corporates throughout the week due to a fall in crude oil prices.

Meanwhile, FIIs were net sellers in Indian equities throughout the current week. The most selloff was seen on December 5th, 7th, and 8th. Overall, FIIs pulled out ₹4,305.97 crore from equities.

On the December 5-9 week market performance, Vinod Nair, Head of Research at Geojit Financial Services said, after touching a record high, the domestic market experienced significant volatility due to the RBI meeting, global markets tumbled due to fear of an economic slowdown and worries over a Fed rate hike.

Nair added that the RBI raised policy rates by 35 basis points, as expected while remaining cautious and signaling a further rate hike in the upcoming meeting. The policy stance was maintained as “withdrawal of accommodation” to bring inflation within the target range while supporting growth. The GDP forecast for FY23 was brought down from 7.0% to 6.8% considering the spillover effect of the global economic slowdown.

He also said, crude oil prices dropped. However, while easing COVID curbs in China benefited the demand outlook, fresh sanctions on Russian oil further added volatility to global oil markets. The IT sector witnessed the highest profit booking after warning of a potential slowdown in business due to global recession fears. The market is currently trading at premium valuations; slowing earnings growth will impact market sentiment.

Meanwhile, Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities said, equity markets in India posted negative returns this week. Key indices like BSE Sensex, Nifty 50, BSE Midcap, and BSE Small-cap ended the week in the red. Amongst sectors, the performance was mixed. BSE IT, BSE Healthcare, and BSE Power indices reported sharp declines this week. On the other hand, BSE FMGC, BSE Capital Goods, and BSE Bank ex saw marginal gains. FPIs have been net sellers of Indian equities during the week. Domestic markets reacted to 35 bps repo rate hike by the RBI MPC. The RBI MPC expressed optimism on growth but tackling inflation will likely be a key focus.

What to expect in the week ahead?

In Kotak expert’s view globally, markets are now awaiting US FOMC rate hike action and commentary in their scheduled meeting next week.

According to Nair, the volatility in the market is expected to remain as we await the domestic and US inflation numbers, and the Fed’s interest rate decision next week. The FOMC is projected to raise interest rates by half a percentage in its final meeting of the year, which will take place on 13–14 December 2022.

It needs to be noted that the upcoming week has a host of events lined up. Apurva Sheth, Head of Market Perspectives, Samco Securities said the three large economies—the US, the UK, and India—will each disclose their inflation rate. As a result, the world’s markets will be closely monitoring these numbers and hoping for an improvement. Additionally, the US and UK will be making their interest rate announcements, which will keep the global markets active.

India will also present IIP and WPI inflation data in the week ahead.

Further, three companies are lined up to launch their initial public offering to raise around ₹1,857.95 crore. The three IPOs are Sula Vineyards, Aban Holdings, and Landmark Cars. Also, another player Uniparts India will be making its market debut on December 12 on exchanges BSE and NSE. The IPO was launched from November 30 to December 2nd and was oversubscribed by 25.32 times.

Giving a technical outlook, Sheth added, “Markets are taking a breather after a sharp rally crossing the previous all-time highs last week. The benchmark Nifty could face stiff resistance around the 18,600 mark as there is massive call writing around these strikes in the weekly expiry. On the lower side, 18,300 and 18,000 will act as good support for the markets.”

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.